If possible, I would need this question answered (any steps or formulas would help). I think I have the idea/possible answer but I would like to confirm before turning it in.
Javits & Sons’common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year D1 $3.00 , and the constant growth rate is 5% a year.
a. What is the company’s cost of common equity if all of its equity comes from retained earnings?
b. If the company issued new stock, it would incur a 10% flotation cost. What would be the cost of equity from new stock?