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Cost of Equity with and without Flotation
Javits & Sons' common stock currently trades at $25.00 a share. It is expected to pay an annual dividend of $2.75 a share at the end of the year (D1 = $2.75), 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.
%
If the company were to issue new stock, it would incur a 8% flotation cost. What would the cost of equity from new stock be? Round your answer to two decimal places.
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