Purchase Solution

Cost of Retained Earnings

Not what you're looking for?

Ask Custom Question

A firm's stock is selling for $78. The next annual dividend is expected to be 2.70. The growth rate is 9%. The flotation cost is 5.00. What is the cost of retained earnings? A)13.09%, B)12.46%, C)12.75%, D)none of the above

Purchase this Solution
Solution Summary

The solution explains how to calculate the cost of retained earnings using the dividend discount model

Solution Preview

The cost can be found using the dividend discount model
Cost = ...

Purchase this Solution
Free BrainMass Quizzes
Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

View More Free Quizzes
Related BrainMass Solutions

  • EPS - Excel

    Calculate the firm's cost of retained earnings, and the cost of new common equity. c. Calculate the breakpoint associated with retained earnings. d. If the after-tax cost of debt is 8%, what is the WACC with retained earnings?

  • Retained Earnings Breakpoint

    Assume the firm goes to raise $250 Mil, what is the weighted average cost of capital: _____________________ WEIGHTED AVERAGE COST OF CAPITAL of retained earnings 1 2 1*2 Value Weights Cost Long Term Debts 162.5 0.650 8.0% 5.20%

  • Missing Amounts

    Ending retained earnings = beginning retained earnings + net income - dividend 29,000=10,000+Net Income - 5,000 Net Income = 24,000 We now go to the income statement Revenues - Cost of Goods Sold - Administrative expenses = Net Income 80,000-cost

  • Weighted average cost of capital if retained earnings

    WACC = Weightage of debt*Cost of debt +Weightage of retained earnings*Cost of retained earnings + Weightage of preferred stock*Cost of preferred stock = 40%*8%+50%*14%+10%*10% =11.2%= Answer Response discusses weighted average cost of capital if

  • Cost associated with retained earnings

    68026 Cost associated with retained earnings Retained earnings has a cost associated with it because A)new funds must be raised, B)there is an opportunity cost associated with stockholder funds, C)Ke >g, D)flotation cost increase the cost of funding

  • EPS Growth Rate

    Calculate the firm's cost of retained earnings, and the cost of new common equity. We can find the cost of retained earnings by using the following equation.

  • Retained earnings and opportunity cost

    In addition, the cost of retained earnings is slightly less than the cost of common stock since no issuance costs is incurred.

  • Cost of equity from retained earnings

    10.60% 8.80% 11.28% 11.17% 9.93% Cost of retained earnings = D1/P0 + g D1 = D0 X (1+g) = 0.90 X (1+7%) = 0.963 Cost of retained earnings = 0.963/22.5 + 7% = 11.28% The solution explains the calculation of cost of equity from retained earnings

  • Cost of Retained Earnings for Amy Jolly's Company

    14% X (1-0.3) = 9.8% (we take after tax cost as interest is tax deductible on debt) The assumption of Amy is not correct as the cost of retained earnings is less than the cost of debt The solution explains how to calculate the cost of retained earnings

  • Forecasting inventories & end-of-year retained earnings

    If the dividend payout ratio is expected to be 25.00 percent, compute forecasted end-of-year retained earnings. 1. Sales are 26,117. Gross Margin at 35%=26117*35%=9140.95. Gross Margin=sales-Cost of Goods Sold ( or cost of sales).

View More Related Solutions