Houston Cougar Corp has established a target capital structure of 40% debt and 60% common equity....

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Houston Cougar Corp has established a target capital structure of 40% debt and 60% common equity. The firm expects to earn $600 in after-tax income during the coming year, and to retain 40% of those earnings. The current market price of the firm's stock is $28; its last dividend was Do = $2.20, and its expected growth rate is 6 percent. Cougar Corp can issue new common stock at a 15% flotation cost. What will Houston's marginal cost of equity capital be if it must fund a capital budget requiring $600 in total new capital? a. 15.8% 13.9% C. 7.9% d. 14.3% ? e. 9.7% 32.20 + 0.06 $280 50.13857 13.9% Houston Cougar Corp has established a target capital structure of 40% debt and 60% common equity. The firm expects to earn $600 in after-tax income during the coming year, and to retain 40% of those earnings. The current market price of the firm's stock is $28; its last dividend was Do = $2.20, and its expected growth rate is 6 percent. Cougar Corp can issue new common stock at a 15% flotation cost. What will Houston's marginal cost of equity capital be if it must fund a capital budget requiring $600 in total new capital? a. 15.8% 13.9% C. 7.9% d. 14.3% ? e. 9.7% 32.20 + 0.06 $280 50.13857 13.9%