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Greenwood Technology's common stock is presently trading at $ 3 7 . 5 0 per share. The firm anticipates an earnings per share ( EPS

Greenwood Technology's common stock is presently trading at $37.50 per share. The firm anticipates an earnings per share (EPS) of $2.75 for the current year, with an expected payout ratio of 70% and a constant growth rate in dividends of 6.00%. If Greenwood Technology decides to issue new shares to the public at the current price, it will incur flotation costs of 8%. a. Explain how flotation costs affect the cost of new equity compared to retained earnings, and why companies might still opt to issue new stock despite these costs. (4 marks)b. Discuss the impact of dividend payout ratios and growth rates on a company's dividend policy and its implications for shareholder value. (4 marks)c. Calculate the cost of retained earnings for Greenwood Technology using the Dividend Growth Model. (4 marks)d. Determine the cost of new equity considering the flotation costs, and calculate by how much the cost of new stock exceeds the cost of retained earnings. (6 marks)

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