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If a firm plaris to issue new stock, flotation costs (inwestment bankers' fees) should not be ignored. There are two approaches to use to account for flocation costs. The first aporoach is to add the sum of flotation costs for the debt, preferred, and common stock and add them to the initiat investment cost. Because the investment cost is increased, the project's expected rate of retum is reduced so it may not meet the firm's hurdie rate for scoepcance of the project. The second approach involves adjusting the cost of common equily as foliows: The diference between the fiotation-adjusted cost of equity and the cost of equity calculated wathout the flotation adjustment represents the flotabion cost adjustrnent: Quantitative Problem: Barton Industries expects next vear's annual dividens, Ok to be $1.60 and it expects dividends to grow at o constant rate q - 5%. The Aim's current comman stock price, P0, is $25.00. If it needs to lissue new common stock, the firm wal encounter a 6% flotation cost, F. What is the flotation cost adjuatment that must be added to its cost of recained earnings? Do not round intermediate calculations, kound your answer to two decimal places. What is the cost of new common equity considering the estimate made from the three estimation methodologies? Do not round incermediate calculations. Round your answer to two decimol places

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