Cost of Common Equity with Flotation
Banyan Co.’s common stock currently sells for $41.50 per share. The growth rate is a constant 12.6%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 30%, and the expected return on equity (ROE) is 18%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.
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