Question: Cost of Equity with and without Flotation Jarett & son's common stock currently trades at $39.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D_1 - $3.00), and the constant growth rate is 5% a year.
a. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round your intermediate calculations. %
b. If the company issued new stock, it would incur a 16% flotation cost. What would be the cost of equity from new stock? Do not round your intermediate calculations. %