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c) What is the firm's cost of preferred stock assuming that the company had to issue new preferred stocks? d) What is the estimated
c) What is the firm's cost of preferred stock assuming that the company had to issue new preferred stocks? d) What is the estimated cost of common equity using the Discounted Dividend Model (DDM)? And the estimated cost using the Capital Asset Pricing Model (CAPM)? e) Based on the assumptions given in the case, what is your final estimate of the cost of common equity? f) If you compare the cost of preferred stocks and the cost of common stocks, which one would you expect to be higher? Justify your answer g) What is the company's weighted average cost of capital (WACC)? How would you interpret this coefficient? h) Explain in your own words why new shares that are raised externally have a higher percentage cost than equity that is raised internally by retaining earnings. i) Santona Osmann estimates that if it issues new shares the flotation cost will be 8.5%. The company incorporates the flotation cost into the DDM approach. What is the estimated cost of newly issued shares taking into consideration the flotation costs?
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