A firm's stock is selling for $82. The next annual dividend is expected to be $2.00....

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Question

A firm's stock is selling for $82. The next annual dividend is expected to be $2.00....

A firm's stock is selling for $82. The next annual dividend is expected to be $2.00. The growth rate is 7%. The flotation cost is $6. What is the cost of retained earnings?

8.09%

9.44%

10.89%

7.29%

business finance

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Answer 1

Answer #1

B. 9.44%

Cost of retained earnings = (D₁ / P₀) + g

Cost of retained earnings = ($2.00 / $82) + 0.07

Cost of retained earnings = 0.0944 or 9.44%

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Answer 2

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