Keystone corporation will issue new common stock to finance an expansion. the existing common stock just paid a $1.50 dividend, and dividends are expected to grow at a constant rate 8% indefinitely. the stock sells for $45, and flotation expenses of 5% of the selling price will be incurred on new shares. what is the cost of new common stock be for keystone corp.? a) 11.33%b) 11.51%c) 11.60%d) 11.79%e) 12.53%

D) Ke = 11.79%

Explanation:

We will use the gordon dividen grow model to sovle for  the cost of new equity

we clear for return

in this case we call the retun cost of equity

and we consider the impact of flotation ost, because this is new equity, which reduce the proceeds from the stock

next year dividend 1.50 x 1.08 = 1.62

flotation cost 5% = 0.05

Stock 45

grow 0.08

Ke = 0.117894737  = 11.79%

odd consecutive integers are odd integers that follow each other. they have a difference of 2 between every two numbers. if n is an odd integer, then n, n+2, n+4 and n+6 will be odd consecutive integers. the first number in the pattern is always the variable on its own or in this case, "n". examples.

answer; charters;