Aspen Industries currently pays an annual common stock dividend of $5.00 per share.The company's dividend has grown steadily over the past 10 years at a 7 percent rate and this rate is expected to continue for the foreseeable future.The company's stock currently sells for $70 per share.The company can issue new common stock at a net price of $65 per share.

(a) Determine the firm's cost of $\underline{\text{ internal}}$ equity capital using the dividend capitalization (constant-growth) model.
(b) Determine the firm's cost of $\underline{\text{external }}$ equity capital using the dividend capitalization (constant-growth) model.

Question

Aspen Industries currently pays an annual common stock dividend of $5.00 per share.The company's dividend has grown steadily over the past 10 years at a 7 percent rate and this rate is expected to continue for the foreseeable future.The company's stock currently sells for $70 per share.The company can issue new common stock at a net price of $65 per share.

(a)	Determine the firm's cost of $\underline{\text{   internal}}$ equity capital using the dividend capitalization (constant-growth) model.
(b)	Determine the firm's cost of $\underline{\text{external  }}$  equity capital using the dividend capitalization (constant-growth) model.

Quizplus · Accepted Answer

The Answer of Aspen Industries currently pays an annual common stock dividend of $5.00 per share.The company's dividend has grown steadily over the past 10 years at a 7 percent rate and this rate is expected to continue for the foreseeable future.The company's stock currently sells for $70 per share.The company can issue new common stock at a net price of $65 per share.

(a)	Determine the firm's cost of $\underline{\text{   internal}}$ equity capital using the dividend capitalization (constant-growth) model.
(b)	Determine the firm's cost of $\underline{\text{external  }}$  equity capital using the dividend capitalization (constant-growth) model.

Aspen Industries Currently Pays an Annual Common Stock Dividend of $5.00