Question $4(1$ point$)$

Javits & Sons' common stock currently trades at $$49\mathrm{.}50$ a share. It is expected to pay an annual dividend of $$6\mathrm{.}00$ a share at the end of the year, and the constant growth rate is $8\mathrm{.}00\%$ 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 $22\mathrm{.}50\%$ flotation cost. What would be the cost of equity from new stock?

a$)8\mathrm{.}000\%$; b$)22\mathrm{.}500\%$

a$)20\mathrm{.}121\%$; b$)23\mathrm{.}640\%$

a$)21\mathrm{.}091\%$; b$)23\mathrm{.}640\%$

a$)20\mathrm{.}121\%$; b$)24\mathrm{.}891\%$

a$)21\mathrm{.}091\%$; b$)24\mathrm{.}891\%$