Bouchard Company's stock sells for $20 per share, its last dividend (D0) was $1.00, its growth rate is a constant 6 percent, and the company would incur a flotation cost of 20 percent if it sold new common stock.Retained earnings for the coming year are expected to be $1,000,000, and the common equity ratio is 60 percent.If Bouchard has a capital budget of $2,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?
A)11.30%
B)11.45%
C)11.80%
D)12.15%
E)12.63%

Question

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The Answer of Bouchard Company's stock sells for $20 per share, its last dividend (D0) was $1.00, its growth rate is a constant 6 percent, and the company would incur a flotation cost of 20 percent if it sold new common stock.Retained earnings for the coming year are expected to be $1,000,000, and the common equity ratio is 60 percent.If Bouchard has a capital budget of $2,000,000, what component cost of common equity will be built into the WACC for the last dollar of capital the company raises?
A)11.30%
B)11.45%
C)11.80%
D)12.15%
E)12.63%

Bouchard Company's Stock Sells for $20 Per Share, Its Last