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h 10: Assignment - The Cost of Capital k to Assignment Attempts: Average: 14 5. The cost of new common stock True or False: The following statement accurately describes how firms make decisions related to issuing new common stock. una carta a termos de una mano mang van comentaris Taking flotation costs into account will reduce the cost of new common stock. False: Flotation costs are additional costs associated with raising new common stock True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 Minus the flotation cost-similar to how the after-tax cost of debt is calculated. Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $500,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is (rounded to two decimal places) White Lion Homebuilders has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $2.45 at the end of the year. The company's earnings and dividends' growth rate are expected to grow at the constant rate of 5.20% into the foreseeable future. If White Lion expects to incur flotation costs of 6.50% of the value of its newly-raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be 5745,000. Its target capital structure consists of 35% debt, 5% preferred, and 60% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint

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