Business, 12.04.2021 21:00 addisonrausch

Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm's tax rate is 34%. The firm can issue the following securities to finance the investments: Bonds: Mortgage bonds can be issued at a pre-tax cost of 8.0 percent. Debentures can be issued at a pre-tax cost of 11.0 percent. Common Equity: Some retained earnings will be available for investment. In addition, new common stock can be issued at the market price of $50. Flotation costs will be $3 per share. The recent common stock dividend was $6.83. Dividends are expected to grow at 8% in the future. Require:
What is the cost of external equity?

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Bay Beach Industries wants to maintain their capital structure of 40% debt and 60% equity. The firm'...

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