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The Evanec Company's next expected dividend, D1, is $3.62; itsgrowth rate is 6%; and its common stock now sells for $35. Newstock (external equity) can be sold to net $33.25 per share.

a. What is Evanec's cost of retained earnings, rs? Round youranswer to two decimal places.
rs =__________ %

b. What is Evanec's percentage flotation cost, F? Round your answerto two decimal places.
F =_______ %

c. What is Evanec's cost of new common stock, re? Round your answerto two decimal places.
re = _______

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Nestor Rutherford
Nestor RutherfordLv2
28 Sep 2019

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Related questions

Problem 10-7
Cost of Common Equity with and without Flotation

The Evanec Company's next expected dividend, D1, is $3.23; its growth rate is 5%; and its common stock now sells for $37. New stock (external equity) can be sold to net $35.15 per share.

What is Evanec's cost of retained earnings, rs? Round your answer to two decimal places. Do not round your intermediate calculations.
rs = %

What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.
F = %

What is Evanec's cost of new common stock, re? Round your answer to two decimal places. Do not round your intermediate calculations.
re = %

Cost of Common Equity with and without Flotation

The Evanec Company's next expected dividend, D1, is $3.95; its growth rate is 5%; and its common stock now sells for $34. New stock (external equity) can be sold to net $28.90 per share.

What is Evanec's cost of retained earnings, rs? Round your answer to two decimal places. Do not round your intermediate calculations.
rs = ___________ %

What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.
F = _______%

What is Evanec's cost of new common stock, re? Round your answer to two decimal places. Do not round your intermediate calculations.
re = _____________ %

Palencia Paints Corporation has a target capital structure of 45% debt and 55% common equity, with no preferred stock. Its before-tax cost of debt is 10% and its marginal tax rate is 40%. The current stock price is P0 = $26.50. The last dividend was D0 = $2.00, and it is expected to grow at a 5% constant rate. What is its cost of common equity and its WACC? Round your answers to two decimal places. Do not round your intermediate calculations.

rs = _________%

WACC = ______________ %

Cost of common equity

The Bouchard Company's EPS was $6.96 in 2005, up from $3.34 in2000. The company pays out 50% of its earnings as dividends, andits common stock sells for $40.

a. Calculate the past growth rate in earnings. (Hint: This is a5-year growth period.) Round your answer to two decimalplaces.
_________ %

b. The last dividend was D0 = 0.50($6.96) = $3.48. Calculate thenext expected dividend, D1, assuming that the past growth ratecontinues. Round your answer to two decimal places.


c. What is Bouchard's cost of retained earnings, rs? Round youranswer to two decimal places.
_______ %

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