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Question
Sentry Manufacturing paid a dividend yesterday of $5 per share (D0 = $5). The dividend is expected to grow at a constant rate of 8% per year. The price of Sentry Manufacturing's stock today is $29 per share. If Sentry Manufacturing decides to issue new common stock, flotation costs will equal $2.50 per share. Sentry Manufacturing's marginal tax rate is 35%. Based on the above information, the cost of new common stock isA) 28.38%.
B) 24.12%.
C) 26.62%.
D) 31.40%.
Answer
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