Calculate the cost of internal common equity

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Reference no: EM131962816

Question: Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4 dividend was recently paid. Earnings per share 5 years ago were $5. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firm's marginal tax rate is 34 percent. Calculate the cost of

(a) internal common equity and

(b) external common equity.

Reference no: EM131962816

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