Cost of equity with and without flotation- Jarett & Son's common stock currently trades at $30.00 a share. It is expected to pay an annual divident of $1 a share at the end of the year (D1=$1.00), and the constant growth rate is 4% a year.
a. What is the company's cost of common equity if all of its equity comes from retained earnings?
b. If the company issued new stock, it would incur a 10% flotation cost. What would be the cost of equity from new stock?