15. Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (Dj) of $2.50 per share, and the current price of its common stock is $50 per share. The expected growth rate is 8 percent.

a. Compute the cost of retained earnings (Kg). Use Formula 11-6 on page 338.

b. If a $3 flotation cost is involved, compute the cost of new common stock

(Kn). Use Formula 11-7 on page 339.