6. (Cost of equity) the common stock for the Bestsold Corporation sells for $58. If a new issue is sold, the flotation costs are estimated to be 8 percent. The company pays 50 percent of its earnings in dividends, and a $4 dividend was recently paid. Earnings per share 5 year ago were $5. Earnings are expected to continue to grow at the same annual rate in the future as during the past 5 years. The firms marginal tax rate is 34%. Calculate the cost of 1. Internal common equity and 2. External common equity.
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