Cost of new common stock represent the fees that firms pay to investment bankers to help them issue new common stock. True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. Taking flotation costs into account will reduce the cost of new common stock. True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost-similar to how the after-tax cost of debt is calculated. False: Flotation costs are additional costs associated with raising new common stock. White Lion Homebuilders has a current stock price of $33.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of next year. The company's earnings' and dividends' growth rate are expected to grow at the constant rate of 5.20% into the foreseeable future. If White Lion expects to incur flotation costs of 3.750% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be _______. Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be $745,000. Its target capital structure consists of 35% debt, 5% preferred, and 60% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint: $1, 241, 667 $1, 552, 084 $1, 303, 750 $2, 128, 571