The Ritz Carlson would like to calculate the cost of preferred stock and common stock.

a. The Ritz Carlson sells preferred stock for $72.00 per share, and it pays a $3.50 underwriting fee per share. The dividend for preferred stock is $7.45. Calculate the cost of preferred stock.

b. The Ritz Carlson sells common stock for $125.00 per share. The hotel company pays $5.00 per share in underpricing costs and $3.50 per share in flotation costs. It expects to pay dividends of $12.72 next year. Its dividends have been growing at an annual rate of 3% and it expects this rate to continue in the foreseeable future. Calculate the cost of common stock equity (retained earnings).

c. Refer to the information in part b to calculate the cost of new common stock equity.