Given the following, compute the cost of externally generated equity (new equity) using the DCF approach:
The par value of the firms outstanding 20 year 8% annual coupon debt is 1,000 and the debt currently has a market value of 800.
The firm's tax rate is 30%.
The current dividend (just paid) is 2.00.
The dividend growth rate is 3%.
The current stock price is 20.00.
New equity flotation costs are 10%.
The risk free rate is 4%.
The market risk premium (Market return - Risk free rate) is 6%.
The security beta is 2.
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Given the following, compute the cost of externally generated equity (new equity) using the DCF appr...
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