If ABC Industries expects next year's annual dividend to be $2.00 and It expects dividends to grow at a constant rate of 4%. The current common stock price is $20.50 If it needs to issue new common stock,the firm will encounter a 5.2% flotation cost, Assume that the cost of equity calculated Without the flotation adjustment is 13% and the cost of old common equity Is 11.6%. What is the flotation cost adjustment that must be added to Its cost of retained earnings?
What Is the cost of new common equity considering the estimate made from the three estimation methodologies?