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Cost of External Equity (New Common Stock Issuances) Common stock is currently selling for $39.00...

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Accounting

Cost of External Equity (New Common Stock Issuances)

Common stock is currently selling for $39.00 per share. Stock expects to pay a current dividend of $1.60 per share and earnings and dividends are expected to grow at 7.00% rate. The issuance costs on this stock are $2.00 per share.

(financed with blend of 40.00% debt, 30.00% new retained earnings as internal earnings and 30.00% external equity for new common stock issuances)

Showing formula values and calculations, please, so I can learn how to plug in the figures for future work!

P0:

Pnet:

D0

D1

g

Kne (the cost of new equity or the cost of external equity) =

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