Do the retained earnings have a cost? How is it being determined?
Do the retained earnings have a cost? How is it being determined?
Homework Answers
If company distribute earnings to the shareholders and do not retain earnings for future expansion of the business. This earning help shareholders to earn more in future.
Cost of retained earning is the cost that 'sacrifices by the shareholders' . This cost is equal to the income of the shareholders that it could earned by placing these funds in alternative investments.
Formula for determining cost of retained earning
Using Discounted cash flow method
Cost of Retained Earnings = (Upcoming year dividend / stock price) + growth
Using CAPM
Required Rate of Return = Risk free rate + Beta x (Market rate of return - Risk free rate)
The balance in retained earnings at the end of the year is determined by retained earnings...
The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year. Multiple Choice Plus net income, minus dividends. Plus accruals, minus deferrals. Plus revenues, minus liabilities. Plus assets, minus liabilities. A prepaid expense is an expense: Multiple Choice Incurred before the cash is paid. O Incurred and paid Pald but not yet Incurred. O All of these answer choices are incorrect.
How do I get the firms addition to retained earnings at the end? I have the...
How do I get the firms addition to retained earnings at the end?
I have the answer, but don't know how to arrive at it.
You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts a. Arrange the accounts...
What is the cost of retained earnings? Question 7 10 pts Cost of retained earnings. Suppose...
What is the cost of retained earnings?
Question 7 10 pts Cost of retained earnings. Suppose next year's dividend is $1.50. Current price of common stock is $29.41. Constant dividend growth rate is 5%. What is the cost of retained earnings? 10.10% 10.98% 10.36% 9.89%
at the 21. The balance of retained earnings at the end of the year is determined...
at the 21. The balance of retained earnings at the end of the year is determined by retained earnings beginning of the year A. Plus revenues, minus liabilities. B. Plus accruals, minus deferrals. C. Plus net income, minus dividends. D. Plus assets, minus liabilities 22. In its first year of operations Yale Inc. had income before income taxes of $500,000 Duning tne yeu Yale what is their net income for the year? made estimated quarterly income tax payments that totaled...
How is net income connected to retained earnings and how does the Statement of Retained Earnings...
How is net income connected to retained earnings and how does the Statement of Retained Earnings help the reader of financial statements understand a company’s past performance? What could you conclude about a company who ended their 3rd year of operations with a Net Loss of $20,000 but that has an ending balance in retained earnings of $50,000? Describe a scenario that could explain how these results are possible
How do the income statement, statement of retained earnings, and the balance sheet interact and in...
How do the income statement, statement of retained earnings, and the balance sheet interact and in what order must the statements be prepared?
How is net income connected to retained earnings and how does the Statement of Retained Earnings...
How is net income connected to retained earnings and how does the Statement of Retained Earnings help the reader of financial statements understand a company’s past performance? What could you conclude about a company who ended their 3rd year of operations with a Net Loss of $20,000 but that has an ending balance in retained earnings of $50,000? Describe a scenario that could explain how these results are possible. Content, concept application, and writing quality will impact your grade. There...
calculate retained earnings Exercise 2-11 Calculate retained earnings LO 2,3 Retained earnings, December 31, 2015 Cost...
calculate retained earnings
Exercise 2-11 Calculate retained earnings LO 2,3 Retained earnings, December 31, 2015 Cost of equipment purchased during 2016 Not loss for the year ended December 31, 2016 Dividends declared and paid in 2016 Decrease in cash balance from January 1, 2016, to December 31, 2016 Decrease in long-term debt in 2016 $ 305,300 41,000 4.950 17,000 11,600 15.900 Required: From the above data, calculate the retained earnings balance as of December 31, 2016. (Deductible amounts should be...
Attempts: Average: 15 S. The cost of retained earnings The cost of retained earnings The cost...
Attempts: Average: 15 S. The cost of retained earnings The cost of retained earnings The cost of raising capital through retained earings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The yield on a three-month T-bills 39, the yield on a 10-year T-bond is 3.67%, the market risk premium beta of 0.B0. Using the Capital Asset Pricing Model (CAPM) approach, Wilson's cost of equity is 6.97% and the Wilson...
The cost of retained earnings the required rate of If a firm cannot invest retained earnings...
The cost of retained earnings the required rate of If a firm cannot invest retained earnings to earn a rate of return return on retained earnings, it should return those funds to its stockholders. The cost of equity using the CAPM approach The yield on a three-month T-bill is 3%, the yield on a 10-year T-bond is 4.30%. the market risk premium is 8.17%. and the Burris Company has a beta of 1.13. Using the Capital Asset Pricing Model (CAPM)...
The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year. Multiple Choice Plus net income, minus dividends. Plus accruals, minus deferrals. Plus revenues, minus liabilities. Plus assets, minus liabilities. A prepaid expense is an expense: Multiple Choice Incurred before the cash is paid. O Incurred and paid Pald but not yet Incurred. O All of these answer choices are incorrect.
How do I get the firms addition to retained earnings at the end?
I have the answer, but don't know how to arrive at it.
You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts a. Arrange the accounts...
What is the cost of retained earnings?
Question 7 10 pts Cost of retained earnings. Suppose next year's dividend is $1.50. Current price of common stock is $29.41. Constant dividend growth rate is 5%. What is the cost of retained earnings? 10.10% 10.98% 10.36% 9.89%
at the 21. The balance of retained earnings at the end of the year is determined by retained earnings beginning of the year A. Plus revenues, minus liabilities. B. Plus accruals, minus deferrals. C. Plus net income, minus dividends. D. Plus assets, minus liabilities 22. In its first year of operations Yale Inc. had income before income taxes of $500,000 Duning tne yeu Yale what is their net income for the year? made estimated quarterly income tax payments that totaled...
calculate retained earnings
Exercise 2-11 Calculate retained earnings LO 2,3 Retained earnings, December 31, 2015 Cost of equipment purchased during 2016 Not loss for the year ended December 31, 2016 Dividends declared and paid in 2016 Decrease in cash balance from January 1, 2016, to December 31, 2016 Decrease in long-term debt in 2016 $ 305,300 41,000 4.950 17,000 11,600 15.900 Required: From the above data, calculate the retained earnings balance as of December 31, 2016. (Deductible amounts should be...
Attempts: Average: 15 S. The cost of retained earnings The cost of retained earnings The cost of raising capital through retained earings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The yield on a three-month T-bills 39, the yield on a 10-year T-bond is 3.67%, the market risk premium beta of 0.B0. Using the Capital Asset Pricing Model (CAPM) approach, Wilson's cost of equity is 6.97% and the Wilson...
The cost of retained earnings the required rate of If a firm cannot invest retained earnings to earn a rate of return return on retained earnings, it should return those funds to its stockholders. The cost of equity using the CAPM approach The yield on a three-month T-bill is 3%, the yield on a 10-year T-bond is 4.30%. the market risk premium is 8.17%. and the Burris Company has a beta of 1.13. Using the Capital Asset Pricing Model (CAPM)...
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