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  3. 1. bouchard company's stock sells for $20 per shar

1. Bouchard Company's stock sells for $20 per share, its last dividend (D0) was $1.00,...

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Accounting

1. 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? Show all your work.

a.

11.30%

b.

11.45%

c.

11.80%

d.

12.15%

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