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(Cost of equity) The common stock for the Bestsold Corporation sells for $64. If a new issue is sold, the flotation costs are estimated to
(Cost of equity) The common stock for the Bestsold Corporation sells for $64. If a new issue is sold, the flotation costs are estimated to be 11 percent. The company pays 80 percent of its earnings in dividends, and a $7.20 dividend was recently paid. Earnings per share 3 years ago were $7.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 3 years. The firm's marginal tax rate is 36 percent. Calculate the cost of (a) internal common equity and (b) external common equity
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