Salte corporation is issuing new common stock at a market price of $33. Dividends last year were $1.65 and are expected to grow at an annual rate of 9 percent forever. Flotation costs will be 12 percent of market price. What is Salte's cost of equity?
The common stock for Bestsold Corporation sells for $56. If a new issue is sold, the floatation costs are estimated to be 11 percent. The company pays 60 percent of its earnings in dividends and a $3.60 dividend was recently paid. Earnings per share 6 years ago were $4.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 6 years. The firm's marginal tax rate is 34 percent. Calculate the cost of
a) internal common equity
b) external common equity