Jarett & Sons's common stock currently trades at $33.00 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (D1 = $1.25) 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? Do not round intermediate calculations. Round your answer te two decimal places. 5.76 % b. If the company issued new stock, it would incur a 13% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculatio Round your answer to two decimal places. 18.76 %

Jarett & Sons's common stock currently trades at $33.00 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (D1 = $1.25) 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? Do not round intermediate calculations. Round your answer te two decimal places. 5.76 % b. If the company issued new stock, it would incur a 13% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculatio Round your answer to two decimal places. 18.76 %

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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Jarett & Sons's common stock currently trades at $32.00 a share. It is expected to pay an annual dividend of $1.00 a share at the end of the year (D1 = $1.00), and the constant growth rate is 6% a year. A. 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. Do not round your intermediate calculations.% B. If the company issued new stock, it would incur a 19% flotation cost. What would be the cost of equity from new stock? Round your answer to two decimal places. Do not round your intermediate calculations.%
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