Suppose that you did not know the tax situation of the holders of your common stock, but

Question:

Suppose that you did not know the tax situation of the holders of your common stock, but were able to ascertain that the average personal tax rate was about 40 percent. Assume that the cost of equity for comparable common stocks is 0.12 (ke = 0.12).

What could you conclude to be the cost of retained earnings?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Question Posted: