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A. Burnwood Tech plans to issue some $60 par preferred stock with a 8% dividend. A...

A. Burnwood Tech plans to issue some $60 par preferred stock with a 8% dividend. A similar stock is selling on the market for $70. Burnwood must pay flotation costs of 7% of the issue price. What is the cost of the preferred stock? Round your answer to two decimal places.

B. Summerdahl Resort's common stock is currently trading at $39 a share. The stock is expected to pay a dividend of $1.00 a share at the end of the year (D1 = $1.00), and the dividend is expected to grow at a constant rate of 7% a year. What is the cost of common equity? Round your answer to two decimal places.

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Answer #1

cost of preferred stock = 7.37%

Cost of equity = 9.56%

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