The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4 dividend was recently paid. Earnings per share 5 year ago were $5.00.
Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate is 34 percent.
Calculate of (a) internal common equity and (b) external common equity.