5 : 5: Cost of Capital: Cost of New Common Stock

Barton Industries expects next year's annual dividend, D₁, to be $1.64 and it expects dividends to grow at a constant rate g_L = 4.3%. The firm's current common stock price, P₀, is $20.50. If it needs to issue new common stock, the firm will encounter a 4.4% flotation cost, F. Assume that the cost of equity calculated without the flotation adjustment is 12.3% and the cost of old common equity is 12.0%. What is the flotation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.

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What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round intermediate calculations. Round your answer to two decimal places.

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