Jarett & Sons' common stock currently trades at $33.00 a share. It is expected to pay an annual dividend of $1.50 a share at the end of the year (D₁ = $1.50), and the constant growth rate is 4% a year.

1. What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.

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2. If the company issued new stock, it would incur a 12% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.

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3. Jarrett & Sons' common stock currently sells for $49.25 per share. The growth rate is a constant 3%, and the company has an expected dividend yield of 3%. The expected long-run dividend payout ratio is 50%, and the expected return on equity (ROE) is 6.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.

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