Magic Candy Co. expects to earn $4.75 per share during the current year, its expecteddividend payout ratio is 75%, its expected constant dividend growth rate is 5.0%, and itscommon stock currently sells for $50 per share. New stock can be sold to the public at thecurrent price, but a flotation cost of 4% would be incurred. What would be the cost of equityfrom new common stock?(Hint: Dividend Payout Ratio = Dividend Per Share / Earnings Per Share)O 12.42%O 13.75%12.52%12.79%12.13%

Step 1: Calculate the dividend per share (D1) for the next period.Dividend payout ratio = Dividend…

Answered: Magic Candy Co. expects to earn $4.75…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 3P

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Weaver Chocolate Co. expects to earn $4.00 per share during the current year, its expected dividend payout ratio is 70%, its expected constant dividend growth rate is 6.0%, and its common stock currently sells for $45.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? Do not round your intermediate calculations. O a. 11.93% O b. 15.36% O c. 12.55% O d. 12.22% O e. 12.94%
Trahern Baking Co. common stock sells for $32.50 per share. It expects to earn $3.50 per share during the current year, its expected dividend payout ratio is 65%, and its expected constant dividend growth rate is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock? 12.70% 13.37% 14.04% 14.74% 15.48%
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Weaver Brothers expects to earn $3.50 per share (E1) and has an expected dividend payout ratio of 60%. Its expected constant dividend growth rate is 7.0% and its common stock currently sells for $30 per share. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of equity from new common stock?Your answer should be between 10.15 and 16.90, rounded to 2 decimal places, with no special characters.
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?
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XYZ company's common shares are selling for P30.00 per share, and the company expects to set its next annual dividend at P1.50 per share. All future dividends are expected to grow by 6% per year, indefinitely. In addition, XYZ faces a floatation cost of 20% on new equity issues. What is the floatation-adjusted cost of equity? Express your answer in percentage.
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A stock is selling today for $40 per share. At the end of the year, it pays a dividend of $2 per share and sells for $44. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $36. What are the dividend yield and percentage capital gain in this case? Complete this question by entering your answers in the tabs below. Required A Required B Required C Now suppose the year-end stock price after the dividend is paid is $36. What are the dividend yield and percentage capital gain in this case? (Negative amounts should be indicated by a minus sign. Enter your answers as a whole percent.) Dividend yield Capital gains yield

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