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Up0
Systelgg is looking to enter into a new product line, and is looking for financing. Systelgg’s stock is selling for $50, and expects to pay $8 dividends next year. Furthermore, Systelgg’s has a sustainable dividend growth rate of 5% and is looking at paying $4/share in flotation costs.
The cost of equity for Systelgg is closest to:- 20%
- 21%
- 22%
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Up4
The cost of equity with flotation costs can be calculated
as:r_e = D1 / (P0 – F) + g = 8 / (50 – 4) + 0.05 = 22.39%
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