DBC Tech’s common stock currently sells for $45

Subject:FinancePrice:2.86 Bought17

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DBC Tech’s common stock currently sells for $45.00 per share, the company expects to earn $2.75 per share during the current year, its expected dividend payout ratio is 70%, and its expected constant growth rate is 6%. New stock can be sold to the public at the current price, but a flotation cost of 8% would be incurred. By how much would the cost of new stock exceed the cost of common equity from reinvested earnings? Current market price of stock: Earnings per share (Year 1): Dividend payout ratio: Constant growth rate: Flotation cost: Dividend per share (Year 1): Cost of common equity from retained earnings: Cost of newly issued common equity: Premium paid due to new stock issuance: $ 45.00 $ 2.75 70% 6% 8% 3 points 5 points 7 points 1 point