Quiz Ch 10 – T/F Cost of Equity from New Stock Issuance and Dividend Growth

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: When the expected dividend growth rate is zero, the cost of external equity capital from issuing new common stock (re) equals rs divided by (1 - F), where F is the percentage flotation cost. However, if the expected growth rate isn't zero, an alternative formula is needed to determine the cost of external equity.

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  • Search Terms: a. b. false true ( (re) (rs) - a be by capital common cost different divided dividend earnings equal equity expected external f). flotation formula. found from growth if is issuing minus must new not of one percentage raised rate required retaining sell stock stock, the then to using zero,
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