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Neo
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A new common stock issue that paid a $1.80 dividend last year.

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A new common stock issue that paid a $1.80 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 7 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $27.50, but 5 percent flotation costs are anticipated.

Internal common equity where the current market price of the common stock is $43. The expected dividend this coming year should be $3.50, increasing thereafter at a 7 percent annual growth rate. The corporation’s tax rate is 34 percent.
Submitted: 6 years ago.
Category: Homework
Expert:  Neo replied 6 years ago.
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A new common stock issue that paid a $1.80 dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of 7 percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now $27.50, but 5 percent flotation costs are anticipated.