Glenna Gayle common stock sells for $55, and dividends paid last year were $1.35. Flotation costs on issuing
stock will be 8% of the market price. The dividends are predicted to have a 10% growth rate.
What is the cost of
internal equity, and new equity, respectively for Glenna Gayle?
D1 = $1.35 × 1.1 = $1.49
Cost of internal equity = $1.49/$55 + .1 = 12.71%
Cost of new equity = $1.49/($55 x .
Business
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