Jarett & Sons's common stock currently trades at $25.00 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 7% 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.

   %

2. If the company issued new stock, it would incur a 15% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.

E B eBook Problem Walk-Through Jarett & Sons's common stock currently trades at $25.00 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 7% a year. a. 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. % b. If the company issued new stock, it would incur a 15% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places. %