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

Essay

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 internal equity capital using the dividend capitalization (constant-growth) model.
(b)Determine the firm's cost of external equity capital using the dividend capitalization (constant-growth) model.