Diouf Corporation is estimating its cost of common stock financing.Financial analysts are forecasting that Diouf's next dividend will be $2.50, and that the dividend will grow at a rate of 8% for the foreseeable future.The company's stock is currently selling for $50/share.Diouf's investment bankers have advised that a new stock issue would incur flotation costs of 6% of the issue.

a)Determine the common stock investors' required rate of return

b)Determine the cost of retained earnings to Diouf Corporation.

Determine the cost of a new stock issue to Diouf Corporation.

Edu Company's finances itself only with bonds and common stock.Its shareholders require a

22.5% return, and its bondholders require a 14% return.Based on a 50% debt ratio, no flotation

costs, and a 21% tax rate, find Edu's weighted-average cost of capital (WACC).