The Evanec Companys next expected dividend D1 is 259 its gro

The Evanec Company\'s next expected dividend, D1, is $2.59; its growth rate is 7%; and its common stock now sells for $37. New stock (external equity) can be sold to net $31.45 per share.

What is Evanec\'s cost of retained earnings, rs? Round your answer to two decimal places. Do not round your intermediate calculations.
rs =  %

What is Evanec\'s percentage flotation cost, F? Round your answer to two decimal places.
F =  %

What is Evanec\'s cost of new common stock, re? Round your answer to two decimal places. Do not round your intermediate calculations.

Solution

Cost of retained earnings=(D1/Current price)+Growth rate

=(2.59/37)+0.07

=14%

% floatation cost=(Current price of stock-Current net price of external equity)/Current price of stoc

=(37-31.45)/37

=15%

cost of new common stock=(D1/Current net  price)+Growth rate

=(2.59/31.45)+0.07

=15.24%(Approx).