The dividend is expected to grow at a constant rate of 8% per year. The price of Asian Trading Company's stock today is $29 per share. If Asian Trading Company decides to issue new common stock, flotation costs will equal 11%. Asian Trading Company's marginal tax rate is 35%. Based on the above information, the cost of new common stock is:
a. 25.24%.
b. 27.37%.
c. 26.62%.
d. 20.86%.
Answers: 2
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