Solved: What are the costs of internal and external equity, Finance Basics

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What are the costs of internal and external equity

Question:

Javits & Sons' common stock is currently trading at $30 a share. The stock is expected to pay a dividend of $3.00 a share at the end of the year (D1 $3.00), and the dividend is expected to grow at a constant rate of 5 percent a year. If the company were to issue external equity, it would incur a 10 percent flotation cost. What are the costs of internal and external equity?

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Finance Basics: What are the costs of internal and external equity

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