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 companys retained earnings and check if Amys assumption is correct.