(1) COST OF COMMON EQUITY WITH FLOTATION

Banyan Co.s common stock currently sells for $47.25 per share. The growth rate is a constant 8.4%, and the company has an expected dividend yield of 2%. The expected long-run dividend payout ratio is 30%, and the expected return on equity (ROE) is 12%. New stock can be sold to the public at the current price, but a flotation cost of 5% would be incurred. What would be the cost of new equity? Round your answer to two decimal places. Do not round your intermediate calculations.

(2) COST OF PREFERRED STOCK INCLUDING FLOTATION

Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $103.50, but flotation costs will be 7% of the market price, so the net price will be $96.26 per share. What is the cost of the preferred stock, including flotation? Round your answer to two decimal places.

(3) CALCULATION OF g AND EPS

Sidman Products's common stock currently sells for $43 a share. The firm is expected to earn $3.87 per share this year and to pay a year-end dividend of $2.80, and it finances only with common equity.

a) If investors require a 9% return, what is the expected growth rate? Round your answer to two decimal places. Do not round your intermediate calculations.

b) If Sidman reinvests retained earnings in projects whose average return is equal to the stock's expected rate of return, what will be next year's EPS?

(Hint: g = (1 Payout ratio)ROE). Round your answer to the nearest cent. Do not round your intermediate calculations.