Amy jolly is the treasurer of her company. She expects the company will grow at 4 percent
Question:
Amy jolly is the treasurer of her company. She expects the company will grow at 4 percent in the future, and debt securities (YTM = 14%, tax rate = 30%) will always be a cheaper option to finance the growth. The current market price per share of its common stock is $39, and the expected dividend in one year is $1.50 per share. Calculate the cost of the company’s retained earnings and check if Amy’s assumption is correct.
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Using the constant growth formula Cost of retained earnings D1P0 g Where D1 expected dividend ...View the full answer
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Related Book For 
Essentials of Managerial Finance
ISBN: 978-0324422702
14th edition
Authors: Scott Besley, Eugene F. Brigham
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