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 13% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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**Jarett & Sons's Common Stock Analysis**

Jarett & Sons's common stock currently trades at $33.00 per share. It is expected to pay an annual dividend of $1.25 per share at the end of the year (D1 = $1.25), and the constant growth rate is 5% per year.

**a. Cost of Common Equity from Retained Earnings**

Determine 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.

\[ \_\_ \_\_ \_\_ \_\_% \]

**b. Cost of Equity from New Stock**

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 calculations. Round your answer to two decimal places.

\[ \_\_ \_\_ \_\_ \_\_% \]
Transcribed Image Text:**Jarett & Sons's Common Stock Analysis** Jarett & Sons's common stock currently trades at $33.00 per share. It is expected to pay an annual dividend of $1.25 per share at the end of the year (D1 = $1.25), and the constant growth rate is 5% per year. **a. Cost of Common Equity from Retained Earnings** Determine 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. \[ \_\_ \_\_ \_\_ \_\_% \] **b. Cost of Equity from New Stock** 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 calculations. Round your answer to two decimal places. \[ \_\_ \_\_ \_\_ \_\_% \]
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