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2. Problem 10.04 (Cost of Equity with and without Flotation) eBook Problem Walk-Through Jarett &...

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2. Problem 10.04 (Cost of Equity with and without Flotation) eBook Problem Walk-Through Jarett & Sons's common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $1.25 a share at the end of the year (D1 = $1.25), and the constant growth rate is 7% 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 13% 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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