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What is the cost of new common equity

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Question - Barton Industries expects next year's annual dividend, D1, to be $1.80 and it expects dividends to grow at a constant rate gL = 5%. The firm's current common stock price, P0, is $23.20. If it needs to issue new common stock, the firm will encounter a 4.1% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12% and the cost of old common equity is 11.5%.

What is the flotation cost adjustment that must be added to its cost of retained earnings? Round your answer to 2 decimal places. Do not round intermediate calculations.

What is the cost of new common equity? Round your answer to 2 decimal places. Do not round intermediate calculations.

Reference no: EM132844257

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