Instructions to solve the problem:

You are required to use a financial calculator or spreadsheet (Excel) to solve the problem related to the cost of capital.

You are required to show the following 3 steps for the problem.

1. Describe and interpret the assumptions related to the problem.
2. Apply the appropriate mathematical model to solve the problem.
3. Calculate the correct solution to the problem. Submit all answers as percentages and round to two decimal places.

Problem:

Hiro Corp. common stock is selling for $18 per share. The last dividend was $1.40, and dividends are expected to grow at a 8.5% annual rate. Flotation costs on new stock sales are 10% of the selling price. What is the cost of Hiro Inc.'s new common stock?

Thank you,