Problem:
A corporation expects to pay dividends (D1) of $1.75 per share at the END of the current year and the current price of its common stock is $30 per share. The expected growth rate is 3.5% and flotation costs of $1.00 per share are anticipated.
Required:
Question: Making use of the constant growth model, compute the cost of this new common equity.
Note: Show supporting computations in good form.