Finance, retained earnings
Danny Co.’s common stock currently sells for $50.00 per share, the company expects to earn $2.00 per share during the current year, its expected payout ratio is 50%, and its expected constant growth rate is 3.00%. New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. By how much would the cost of new stock exceed the cost of retained earnings?
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