lc26mizzou

Example of a concept which intuitively seems straight forward where I am hung up a bit in the execution is on Page 70 Book 4. Flotation Costs example.

Unsure why they add 5% to the dividend amount of $2 on the numerator. Can't seem to reference that step. 5% is listed as the growth rate but shouldn't that only be added after?

moving forward to page 71

the third NPV could have shown the steps needed to arrive at the new cost of capital of 7.3578 and PV of $69089

Maybe I don't understand something that should be fundamental.

Any help greatly appreciated. Thanks.