2. The growth rate of dividends is :
=( $1.8/0.64)^1/12 - 1 * 100
=( 2.8125)^0.0833 - 1 *100
= 9%
So, the cost of retained earnings is:
Re = D1/ Po + g
= $1.8/ $50 + 0.09
= 12.6%
So,the cost of retained earnings is 12.6%
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