If the Expected Dividend Growth Rate Is Zero, Then the Cost

question 82

True/False

If the expected dividend growth rate is zero, then the cost of external equity capital raised by issuing new common stock (r_e) is equal to the cost of equity capital from retaining earnings (r_s) divided by one minus the percentage flotation cost required to sell the new stock, (1 - F). If the expected growth rate is not zero, then the cost of external equity must be found using a different procedure.

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