(Individual

or component costs of

capital)

Compute the cost of the following:b. A new common stock issue that paid a

$1.60

dividend last year. The par value of the stock is $15, and earnings per share have grown at a rate of

8

percent per year. This growth rate is expected to continue into the foreseeable future. The company maintains a constant dividend-earnings ratio of 30 percent. The price of this stock is now

$25,

but

5

percent flotation costs are anticipated.