The Evanec Company's next expected dividend, D_{1}, is $3.77; its growth rate is 6%; and its common stock now sells for $31.00. New stock (external equity) can be sold to net $24.80 per share.
What is Evanec's cost of retained earnings, r_{s}? Do not round intermediate calculations. Round your answer to two decimal places.
r_{s} = %
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, r_{e}? Do not round intermediate calculations. Round your answer to two decimal places.
r_{e} = %
a) calculation of cost of retained earnings:
Cost of retained earnings= (D1/current price)+ growth
Cost of retained earnings= (3.77/31)+0.06= 0.1216+0.06= 0.1816
Cost of retained earnings= 18.16%
b) calculation of flotation cost percentage:
Floatation cost percentage= (31-24.80)/31*100= 20%
c) calculation of cost of new stock:
Cost of new stock= (3.77/24.80)+0.06= 0.1520+0.06= 0.2120
Cost of new stock is 21.20%
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