Problem:
Browning Co. expects to earn $3.50 per share during the current year, its expected payout ratio is 30.00%, its expected constant dividend growth rate is 3.90%, and its common stock currently sells for $40.00 per share. New stock can be sold to the public at the current price, but a flotation cost of 14.50% would be incurred.
Required:
Question: What would the cost of equity from new common stock be?
Select the correct answer.
- 7.41%
- 6.75%
- 7.19%
- 7.63%
- 6.97%
Note: Please provide through step by step calculations.