2. A common stock is expected to pay a $1.80 dividend. The dividend 12 years was...

Question

Question

business finance

Answer 1

Answer #1

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%

Answer 2

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