Question: The following financial information is available on Rawls Manufacturing Company:
Current per share market price $48.00
Current (t=0)per share dividend $ 3.50
Expected long-term growth rate 5.0%
Rawls can issue new common stock to net the company $44 per share. Determine the cost of internal equity capital (Ke)using the Dividend Valuation Model Approach (DCF) (Compute answer to the nearest 0.1%).
The answers are one of the following:
a. 12.3%
b. 13.4%
c. 13.0%
d. 12.7%