Overland Paid a Dividend of $3 Last Year and Its

question 2

Multiple Choice

Overland paid a dividend of $3 last year and its stock is selling at $75 per share. A constant growth rate of 5% is expected. Overland's flotation costs for a new issue are 10% and the marginal tax rate is 40%.Calculate the cost of new equity.

• A) 8.3%
• B) 8.8%
• C) 9.2%
• D) 9.7%

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