- *Round to 2 decimal places. Please attach excel file*
- (Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 11 percent. The company pays 70 percent of its earnings in dividends, and a $5.60 dividend was recently paid. Earnings per share 3 years ago were $6.00. Earnings are expected to continue to grow at the same annual rate in the future as during the past 3 years. The firm’s marginal tax rate is 34 percent.
- Calculate the cost of
- (a) internal common equity and
- (b) external common equity.
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