Cost of Equity with and without Flotation Javits & Sons\' common stock currently
ID: 2748793 • Letter: C
Question
Cost of Equity with and without Flotation
Javits & Sons' common stock currently trades at $21.00 a share. It is expected to pay an annual dividend of $2.75 a share at the end of the year (D1 = $2.75), and the constant growth rate is 5% a year.
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.
%
If the company were to issue new stock, it would incur a 10% flotation cost. What would the cost of equity from new stock be? Round your answer to two decimal places.
%
Explanation / Answer
Cost of Equity with and without Flotation Javits & Sons' common stock currently