Ellington Electronics wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $3.40 per share, and the current price of its common stock is $70 per share. The expected growth rate is 4 percent. (Do not round intermediate calculations. Round the final answers to 2 decimal places.)

a. Compute the cost of retained earnings (Ke). Cost of retained earnings %

b. If a $2.0 flotation cost is involved, compute the cost of new common stock (Kn). Cost of new common stock %