The Talbot Corporation's common shareholders anticipate receiving a $2.20 per share dividend next year, based on...

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The Talbot Corporation's common shareholders anticipate receiving a $2.20 per share dividend next year, based on the fact that they received $2 last year and expect dividends to grow 10 percent next year. Furthermore, analysts predict that dividends will continue to grow at a rate of 10 percent into the foreseeable future. If Talbot were to issue new common stock, the firm would incur a $7.50 per share cost to sell the new shares. Based on the most recent closing price for the firm's common stock, what would you estimate the cost of a common stock to be for the firm? What is the cost of a new common stock issue? The Talbot Corporation's common shareholders anticipate receiving a $2.20 per share dividend next year, based on the fact that they received $2 last year and expect dividends to grow 10 percent next year. Furthermore, analysts predict that dividends will continue to grow at a rate of 10 percent into the foreseeable future. If Talbot were to issue new common stock, the firm would incur a $7.50 per share cost to sell the new shares. Based on the most recent closing price for the firm's common stock, what would you estimate the cost of a common stock to be for the firm? What is the cost of a new common stock issue?

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To estimate the cost of common stock for Talbot Corporation we can use the dividend growth model whi... View the full answer