Compute the cost of capital
A new common stock issue that paid a $1.80 dividend last year. The par value of the stock is $15, and EPS have grown at a rate of 7% per year. The growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend- earnings ratio of 30%. The price of this stock is now $27.50 nut 5 percent flotation costs (as a percent of market price) are anticipated.