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Cost of Equity with and without Flotation

Jarett & Sons's common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (D1 = $1.25), and the constant growth rate is 8% a year.

What is the company's cost of common equity if all of its equity comes from retained earnings? Round your answer to two decimal places. Do not round your intermediate calculations.

____________%

If the company issued new stock, it would incur a 20% flotation cost. What would be the cost of equity from new stock? Round your answer to two decimal places. Do not round your intermediate calculations.

___________%

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Financial Management, Finance

Category:- Financial Management
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