Earnings are expected to continue to grow at the same

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(Cost of equity) The common stock for the Bestsold Corporation sells for S58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a S4 dividend was recently paid. Earnings per share 5 years ago were S5. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate is 34 percent. Calculate the cost of (a) internal common equity and (b) external com¬mon equity.

Reference no: EM13479942

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