Cost of Equity with and without Flotation
Javits & Sons' common stock currently trades at $27.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D1 = $3.00), and the constant growth rate is 6% a year.
What is the company's cost of common equity if all of its equity comes from retained earnings? Round your answer to two decimal places. % I
If the company were to issue new stock, it would incur a 15% flotation cost. What would the cost of equity from new stock be? Round your answer to two decimal places. %