Last year the Black Water Inc. paid dividends $2.87. Company's dividends are expected to grow at an annual rate of 2% forever. The comapny's common stock is currently selling on the market for 70.26.
The investments banker will charge flotation costs 2.56 per share. Calculate the cost of common equity financing using Gordon Model
Current Dividend (D0)
Growth rate (g)
Expected Dividend (D1), (Do x (1+g))
Current Price of stock (P0)
Investor Required Return (ke), (D1/P0 + g) Amount
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