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Jiffy Co. expects to pay a dividend of $3.50 per share in one year. The current price of Jiffy common stock is $56 per share. Flotation costs are...

Jiffy Co. expects to pay a dividend of $3.50 per share in one year. The current price of Jiffy common stock is $56 per share. Flotation costs are $4.00 per share when Jiffy issues new stock. What is the cost of internal common equity if the long-term growth in dividends is projected to be 8.5 percent indefinitely?

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The cost of internal common... View the full answer

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The cost of a new stock = Expected... View the full answer

3 comments
  • Since it is asking for the cost of internal common equity, which is reinvesting retained earnings, do we subtract the floatation?
    • schubertt4
    • Apr 02, 2018 at 7:09pm
  • Sorrt ...not required to subtract hence answer will be =14.75%
    • Whitswan
    • Apr 02, 2018 at 7:14pm
  • yes internal equity doesnt requires flotaion cost
    • Whitswan
    • Apr 02, 2018 at 7:14pm

The way to approach this... View the full answer

2 comments
  • Since it is asking for the cost of internal common equity, which is reinvesting retained earnings, do we subtract the floatation?
    • schubertt4
    • Apr 02, 2018 at 7:11pm
  • yes my heading is Cost of newly issued common stock but for internal equity flotation won't be required
    • payaljain3
    • Apr 02, 2018 at 9:15pm

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