Jarett & Sons's common stock currently trades at $21.00 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 3% a year.
What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.
%
If the company issued new stock, it would incur a 14% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.
%
The answers are as follows:
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