Armon Brothers, Inc., is attempting to evaluate the costs of internal and external common equity. The company’s stock is currently selling for $62.50 per share. The company expects to pay $5.42 per share at the end of the year. The dividends for the past 5 years are given below:

Year       Dividend

20X5      $5.17

20X4      $4.92

20X3      $4.68

20X2      $4.46

20X1      $4.25

The company expects to net $57.50 per share on a new share after flotation costs. Calculate: (a) the growth rate of dividends; (b) the flotation cost (in percent); (c) the cost of retained earnings (or internal equity); and (d ) the cost of new common stock (or external equity).