If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to account for notation costs. The ffrst approach is to' add the sum of flotation costs for the debt, preferred, and common stock and add them to the initial investment cost. Because the investment cost is increased, the project's expected rate of return is reduced so it may not meet the firm's hurdle rate for acceptance of the project. The second approach involves adjusting the cost of common equity as follows: Cost of equity from new stock =re=Pe[2]D1+8 The difference between the flotation-adjusted cost of equity ond the cost of equity cakculated without the fotation adjustment represents the fotation cost adjustment: Quantitative Problem: Barton lndustries expocts next year's annuol dividend, D1, to be $1,90 and it expects dividends to grow at a constant rate 9=4.55. The firm's current common stock price. P0, is 525.00 . if it needs to issue new common stock, the firm will encounter a 4.2% flotation cost, F. What:is the flotation cost adjustment that myst be added to its cost of retained eamings? Do not round intermediate caloulations. Round your answer to two decimal places. Whot is the cost of new common equity considering the estimate mode from the three estimation methodologies? Do not round intermediate colculations Round your answer to two decimal places