5. The Cost of Capitals Cost of New Common Stock a firm plans to issue new stock, flotation costs (envestment bankers' fees) should not be ignored. There are two approaches to use to account for flotation costs. The first approach to add the sum of fictation costs for the debt, preferred, and common stock and add them to the intal investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hundle rate for acceptance of the project. The second approach involves adjusting the cost of common equity as follows: Cost of equity from new stock-t.. +* PMI-P The difference between the flotation adjusted cost of equity and the cost of equity calculated without the Botation adjustment represents the flotation cost adjustment. Quantitative Problem: artun Industries experts next year's annual dividend, D, to be $2.20 and it expects dividends to grow at a constant role g-4.1%, The firm's current common stock price, is $25.00. 1 it needs to issue new common stock, the firm will encounter a 4.0% fotation cost, f. What is the flatation cost adjustment that must be added to its cost of retained earnings? Do not round intermediate calculations. Round your arewer to two decimal places. 4 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