Part A:
Kr = [ D1 / P0 ] + g
= [ 2.76 / 38 ] + 0.04
= 0.0726 + 0.04
= 0.1126 i.e 11.26%
Cost of Retained earnings is 11.26%
Part B:
Floatation COst = [ Price - Net from Issue ] / Price
= [ $ 38 - $ 32.3 ] / $ 38
= $ 5.7 /$ 38
= 0.15
i.e 15%
Part C:
Ke = [ D1 / Net proceedings from issue ] + g
= [ 2.76 / 32.30 ] + 0.04
= 0.0854 + 0.04
= 0.1254 i.e 12.54%
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