A company needs to raise $2.8 million to fund a new project….
A company needs to raise $2.8 million to fund a new project. It plans to do so by issuing new shares of common stock. The stock is expected to pay a dividend of $2.00 next year and dividends are expected to grow at a constant rate of 4% annually. Investors require a 9% return on similar stocks. How many shares must the company issue to raise the required funds? Assume the stock price reflects the constant growth model.