Arizona State University FIN FIN 300 Builtrite’s common stock is currently selling for $58 a share and…
Builtrite’s common stock is currently selling for $58 a share and the firm just paid an annual dividend of $2.40 per share. Management believes that dividends and earnings should grow at 7% annually. Since new stock would need to be sold to finance an expansion, Builtrite expects flotation costs to be 5% of the expected selling price of $58 a share. Based on this, and a marginal tax rate of 34%, what is the cost of new common stock?
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