Problem:
Trahan Lumber Company hired you to help estimate its cost of capital. You obtained the following data: D1 = $1.25; P0 = $27.50; g = 5% (constant); and the flotation cost is 6% of the proceeds (i.e., F = 6%).
Required:
Question: What is the cost of equity raised by selling new common stock?
Note: Provide support for rationale.