The Evanec Company's next expected dividend, D1, is $3.44; its growth rate is 5%; and its common stock now sells for $30.00. New stock (external equity) can be sold to net $27.00 per share.
What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places.
rs = %
What is Evanec's percentage flotation cost, F? Round your answer to two decimal places.
F = %
What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places.
re = %
a)
cost of retained earnings = D1/price + growth rate
= 3.44/30 + 0.05
= 16.47%
b)
flotation cost = (30-27)/30 = 3/30 = 10%
c)
cost of new common stock = D1/price + growth rate
= 3.44/27 + 0.05
= 17.74%
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