Problem:
Tip Top Hats (TTH) is expected to grow at a 4 percent rate for as long as it is in business. Currently the company's common stock is selling for $34 per share. The most recent dividend paid by TTH was $4. 25 per share. If new common stock is issued, TTH will incur flotation costs equal to 8. 5 percent,
Required:
Question 1: What is the company's cost of retained earnings?
Question 2: What is its cost of new common equity?