If a firm plans to issue new stodk, nstation costs (investment buckers' fees) should not be lgnoned, There are two approaches to use to account for flocation costa. The firnt approbch Is to add the sum of fiotation costs for the debt, preforred, and common stock and add them to the initial imrestment cost. Decause the investment cont is incremied, the profect' expected rate of retum is reductd so it may not meet the firm's hurdle rate for acceptance of the proyect. The second approach involves asjusting the coak of cemmon equaty as follows: Coet of equity frots new stock =ri=Finh17D1+g The difference between the fotation-adjusted cost of equity and the cont ef equty calculated without the focation adjustment represents the flotation cokt adjustment. Quantitative Problemt barton Industries expects next vear's annual dividend, D1, to be 51.80 ahd is expects dividends to grow at a canstant rate 9 m 4.3 . The fimm't current cemmon stock price, Pe, is 120.00 . If it needs to issue neie common stock, the firm will encounter a 5.4 Botation ce0t, F. What is the flotation cost adyuttment that muat be added to its cost of retained earnings? Do not roond intermediate calculstions. Round yeur answer to two deciensl places. What as the coet of new common equity considering the estimate masle frem the three ectimation methodologies? Do not round intermediate cakulatiens. Round yeur answer te frep decmigl places. If a firm plans to issue new stock, flotation costs (investment bankers' fees) should not be ignored. There are two approaches to use to acceunt for flotation costs, The first approaci is to add the sum of fotation 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 returm is reduced so it may not meet the firm's hurdle rate for acceptance of the project, The second appreach involves adjusting the cost of common equity as follows: Cost of equity from new stoek =t0=P0(t1)D1+8 The difference between the flotabon-adjusted cost of cquity and the cost of equity calculated without the notation adjustment represents the fotation cost adjustment. Quantitative Problemt Barton industries expects next year's annual dividend, DH, to be $1.80 and it expects dividends to grow at a constant rate g = 4.3. The firm's current common stock price, 9a, is $20,00. If it needs to issue new common stock, the firm will encounter a 5.4W fiotabon cost, F. What is the flotatian cont asjustment ehat mist be added to its cost of retained earnings? Do not round intermbdiate calculations. Round your answer to two decimal places. What is the cost of nea common ecivity considericg the estimate made from the three entemation mechodologies? Do not round intermediate calciations Round your ansner to fwo decimal bioces