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Company cost of common equity

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Reference no: EM131101034

Javits & Sons common stock currently trades at $24 a share. It is expected to pay an annual dividend of $2.50 a share at the end of the year (D1=$2.50), 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?

b. If the company were to issue new stock, it would incur a 10% flotation cost. What would the cost of equity from new stock be?

Reference no: EM131101034

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