eBook Problem Walk-Through Jarett & Sons's common stock currently trades at $27.00 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. 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 an 8% flotation cost. What would be the cost of
equity from new stock? Do not round intermediate calculations. Round your answer to two
decimal places.
%