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. %
Functions of the Federal Reserve System
The Federal Reserve System looks after the financial activities and operations of the banking system. It is the apex body that has complete control over the banking regulations. All the guidelines regarding the banking system, money supply, and formulation of the monetary policy come under the purview of the Federal Reserve System. The New York Fed also helps in drafting the monetary policy and supervising the financial system.
Elastic and Inelastic Markets
Measuring the change in percentage of an economic variable with respect to change in a different economic variable is known as elasticity. This change in percentage results in a change in price concerning changes in other factors. In simple terms, when one factor brings a change to another factor, it is called elasticity.
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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.
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**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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