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13. Problem 10.13 (Cost of Common Equity with Flotation) ...

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Finance

13. Problem 10.13 (Cost of Common Equity with Flotation)

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Banyan Co.s common stock currently sells for $58.75 per share. The growth rate is a constant 6%, and the company has an expected dividend yield of 5%. The expected long-run dividend payout ratio is 40%, and the expected return on equity (ROE) is 10.0%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.

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