11-9: Adjusting the Cost of Equity for Flotation Costs

Problem 11-13 The Cost of Equity and Flotation Costs

Messman Manufacturing will issue common stock to the public for $30. The expected dividend and growth in dividends are $3.25 per share and 3%, respectively. If the flotation cost is 11% of the issue's gross proceeds, what is the cost of external equity, r_e? Round your answer to two decimal places. %