Calculating Cost of New Equity based on DCF Approach

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Question

You have been provided with the following data: D1 = $1.30; P0 = $42.50; and g = 7.00% (constant). What is the cost of equity from retained earnings based on the DCF approach? If your company is going to issue new equity, it will incur an additional 6% flotation costs what is the cost of new equity?

Summary

This question belongs to finance and discusses about calculating cost of new equity.

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