$2$uestion $4(1$ point$)$

Javits & Sons' common stock currently trades at $$46\mathrm{.}50$ a share. It is expected to pay an annual dividend of $$5\mathrm{.}40$ a share at the end of the year, and the constant growth rate is $7\mathrm{.}40\%$ a year.

a$.$ What is the company's cost of common equity if all of its equity comes from retained earnings?

b$.$ If the company issued new stock, it would incur a $22\mathrm{.}20\%$ flotation cost. What would be the cost of equity from new stock?

a$)19\mathrm{.}872\%$;

b$)22\mathrm{.}327\%$

a$)7\mathrm{.}400\%$; b$)22\mathrm{.}200\%$

a$)19\mathrm{.}872\%$;

b$)23\mathrm{.}431\%$

a$)19\mathrm{.}013\%$;

b$)22\mathrm{.}327\%$

a$)19\mathrm{.}013\%$; b$)23\mathrm{.}431\%$