Question: Cost of Common Equity with Flotation
Banyan Co.'s common stock currently sells for $40.00 per share. The growth rate is a constant 14.4%, and the company has an expected dividend yield of 6%. The expected long-run dividend payout ratio is 20%, and the expected return on equity (ROE) is 18%. New stock can be sold to the public at the current price, but a flotation cost of 10% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.