Question: Magic Candy Co. expects to earn $3.75 per share during the current year, its expected dividend payout ratio is 35%, its expected constant dividend

Magic Candy Co. expects to earn $3.75 per share during the current

Magic Candy Co. expects to earn $3.75 per share during the current year, its expected dividend payout ratio is 35%, its expected constant dividend growth rate is 7.25%, and its common stock currently sells for $64 per share. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. What would be the cost of equity from new common stock? (Hint: Dividend Payout Ratio Dividend Per Share / Earnings Per Share)

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