Suppose That Beach Blanket's Common Shares Sell for $55 Per

question 56

Multiple Choice

Suppose that Beach Blanket's common shares sell for $55 per share, are expected to set their next annual dividend at $3.00 per share, and that all future dividends are expected to grow by 8 percent per year, indefinitely. If Beach faces a flotation cost of 10 percent on new equity issues, what will be the flotation-adjusted cost of equity?

• A) 5.45 percent
• B) 8.06 percent
• C) 13.45 percent
• D) 14.06 percent

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