Problem:
Ballack Co.'s common stock currently sells for $51.00 per share. The growth rate is a constant 8.4%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 40%, and the expected return on equity (ROE) is 14%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred.
Required:
Question: What would be the cost of new equity?
Note: Show supporting computations in good form.