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
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.