Determine what would the cost of equity from new stock be

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Javits & Sons' common stock currently trades at $38.00 a share. It is expected to pay an annual dividend of $2.25 a share at the end of the year (D1 = $2.25), and the constant growth rate is 8% a year.

What is the company's cost of common equity if all of its equity comes from retained earnings?

If the company were to issue new stock, it would incur a 16% flotation cost. What would the cost of equity from new stock be?

Reference no: EM13335412

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