Bania Corporation's target capital structure consists of 40% debt and 60% common equity. Assume that the...

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Bania Corporation's target capital structure consists of 40% debt and 60% common equity. Assume that the firm has no retained earnings to fund it's capital budget in the coming year. Bania's last annual dividend was $1.75, which is expected to grow at a constant rate of 5%; and their current stock price is $21.88. Bania can raise all the debt financing it needs at 11%. If Bania issues new common stock, a 20% flotation cost will be incurred. The firm's tax rate is 25%. 1. What is the component cost of the equity raised by selling new common stock? 2. What is Bania's cost of capital assuming they will have to issue new common stock? Bania Corporation's target capital structure consists of 40% debt and 60% common equity. Assume that the firm has no retained earnings to fund it's capital budget in the coming year. Bania's last annual dividend was $1.75, which is expected to grow at a constant rate of 5%; and their current stock price is $21.88. Bania can raise all the debt financing it needs at 11%. If Bania issues new common stock, a 20% flotation cost will be incurred. The firm's tax rate is 25%. 1. What is the component cost of the equity raised by selling new common stock? 2. What is Bania's cost of capital assuming they will have to issue new common stock?