The Common Stock for El Viss Company Currently Sells for $20

question 20

Essay

The common stock for El Viss Company currently sells for $20 per share.The firm just paid a dividend of $1.50,and the dividend three years ago was $1.30.Dividends per share are anticipated to grow at the same rate in the future as they have over the past three years.Flotation costs for new shares will be 6% of the selling price.Calculate the following:
a.the cost of retained earnings
b.the cost of external equity capital

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Definitions:

Operating Activities

The cash flows related to the core operations of a business, including revenues and expenses.

Indirect Method

The indirect method is a technique used in financial accounting to prepare the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital to find net cash from operating activities.

Cash Outflows

Money going out of a business for any expense, investment, or payment.

Financing Activities

Transactions involving raising capital and repaying it to owners, including issuing equity, settling loans, and paying dividends.