Phillips Enterprises Inc is expected to pay a dividend of $2.60 next year. Dividends are expected to

grow at a constant rate of 8% per year, and the stock price is currently $20.00.

New stock can be
sold at this price subject to flotation costs of 15%. The company's marginal tax rate is 35%. Compute
the cost of internal equity (retained earnings) and the cost of external equity (new common stock),
respectively.
A) 21.00%, 23.29% B) 0, 21.00% C) 8.00%, 23.29% D) 23.00%, 25.48%


A

Business

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