The cost of new equity is calculated by adding the expected dividend yield, based on the net proceeds of the new issue, to the expected dividend growth rate. The expected dividend at the end of the period equals the dividend at time zero times one plus the expected dividend growth rate. Net proceeds received by the entity when issuing one ordinary share equals the market price of a share times one minus the flotation cost percentage. Flotation costs include items such as underwriting fees. printing, and advertising. The calculation of the cost of new equity is as follows:

The DOL may be calculated as the contribution margin sales - variable cost) divided by the excess of the contribution margin ever It <:ed costs. The contribution margin is US $150.000 [25.000 units x $10 unit price - $4 unit variable cost)]. Hence, the DOL in the second year is 1.50 [US $150,000 CM / $150,000 - $50,000 FC)].

The CMR equals unit contribution margin UCM) divided by unit selling price. The UCM equals the unit selling price minus unit variable cost. The original unit selling price was US $60 $9,000,000 revenue 150,000 units), and the original unit variable cost was US $27 [ $1,800,000 + $720,000 + $1,080,000 + $450,000) + 150,000 units]. The original CPr1R was therefore US $.55 [ $60 - $27) + $60]. The new unit variable cost was calculated as US $28.80. Accordingly the unit selling price X) is US $64.