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Please show step by step because I keep getting confused
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# Question : Please show step by step because I keep getting confused : 4051

Please show step by step because I keep getting confused on what formula to use. Thank you!

North man's common equity, debt, and preferred equity are worth \$70,000, \$10,000 and \$20,000 respectively with a total value is \$100,000. The company’s common stock is currently listed at \$54 per share; new preferred stock sells for \$70 per share with a flotation cost of 10% and pays a dividend of \$3.5 per share. Last year the company paid dividends of \$2 per share on common stock, which is expected to grow at a constant rate of 5%. The local bank is willing to finance the project at 12% annual interest. Assuming the company’s tax rate is 35%, do the following computations:

What is the cost of common equity, assuming only retained earnings are used?

What is the cost of new preferred equity?

## Solution 5 (1 Ratings )

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Finance 1 Year Ago 148 Views