True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. The cost of issuing new common stock is calculated the same way as the cost of raising equity capital from retained earnings. True: The cost of retained earnings and the cost of new common stock are calculated in the same manner, except that the cost of retained earnings is based on the firm's existing common equity, while the cost of new common stock is based on the value of the firm's share price net of its flotation cost. False: Flotation costs need to be taken into account when calculating the cost of issuing new common stock, but they do not need to be taken into account when raising capital from retained earnings. Manning Co. is considering a one-year project that requires an initial investment of $500,000; however, in raising this capital, Manning will incur an additional flotation cost of 2.0%. At the end of the year, the project is expected to produce a cash inflow of $550,000. Determine the rate of return that Manning expects to earn on the project after flotation costs are taken into account. 5.5% 7.8% 7.0% 6.6% Manning Co. has a current stock price of $33.35 and is expected to pay a dividend of $2.03 at the end of next year. The company's growth rate is expected to remain constant at 8.7%. If flotation costs represent 3.0% of funds raised, what is the flotation-adjusted cost of new common stock? 12.0% 14.8% 12.8% 15.0% Manning Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 35% debt, 5% preferred, and 60% equity. Determine Manning's retained earnings breakpoint: $875,000 $665,000 $700,000 $735,000