The Cost of Equity and Flotation Costs

Messman Manufacturing will issue common stock to the public for $45. The expected dividend and the growth in dividends are $2.50 per share and 4%, respectively. If the flotation cost is 11% of the issue's gross proceeds, what is the cost of external equity, r_e? Round your answer to two decimal places.

The Cost of Debt and Flotation Costs.

Suppose a company will issue new 20-year debt with a par value of $1,000 and a coupon rate of 9%, paid annually. The issue price will be $1,000. The tax rate is 40%. If the flotation cost is 4% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs. Round your answer to two decimal places. %

What if the flotation costs were 10% of the bond issue? Round your answer to two decimal places. %