Cost of retained earnings=(D1/Current price)+Growth rate
=(2.74/40)+0.07
=13.85%
% flotation cost=(Current price-Net price)/Current price
=(40-36)/40
=10%
Cost of new common stock=(D1/Net price)+Growth rate
=(2.74/36)+0.07
=14.61%(Approx).
eBook The Evanec Company's next expected dividend, D1, is $2.74; its growth rate is 7%; and...
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