Essentials Of Investments
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ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Jarett & Sons' common stock currently trades at $34.00 a share. It is expected to pay an annual dividend of $1.75 a share at the end of the year (D1 = $1.75), and the constant
growth rate is 3% 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 9% flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your
answer to two decimal places.
%
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