Problem:
Ballack Co.'s common stock currently sells for $36.75 per share. The growth rate is a constant 12.8%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 16%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred.
Question: What would be the cost of new equity? Explain in detail and also provide all computation.