A Firm Has Common Stock with a Market Price of $100

question 8

Multiple Choice

A firm has common stock with a market price of $100 per share and an expected dividend of $5.61 per share at the end of the coming year.A new issue of stock is expected to be sold for $98,with $2 per share representing the underpricing necessary in the competitive capital market.Flotation costs are expected to total $1 per share.The dividends paid on the outstanding stock over the past five years are as follows: The cost of this new issue of common stock is ________.

• A) 5.8 percent
• B) 7.7 percent
• C) 10.8 percent
• D) 12.8 percent

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Definitions:

Metabolic Alkalosis

A disturbance in the body's acid-base balance, leading to an increase in blood pH due to excessive alkali in the body.

Gastric Suction

A procedure to remove stomach contents using a tube inserted through the nose or mouth into the stomach.

Pitting Edema

A symptom where pressure applied to the skin leaves a lasting indentation, often indicating fluid accumulation.

Interstitial

Relating to the small spaces or gaps between tissues or parts of an organ in the body.