Question

What would be the cost of new common stock equity for Tangshan Mining if the firm just paid a dividend of $4.25, the stock price is $55.00, dividends are expected to grow at 8.5 percent indefinitely and flotation cost are $6.25 per share?

Answer 1

Calculate the present value, at an interest rate of 6% per annum, of a cash flow of $20,000 due in 25 years (to 2 decimal places).