Question
lediasite Collection EFIS Tools licrosoft Teams asses oom Pro 1.3 ore Curriculum ssessment fourse Evaluations Jourse Materials Landon, the CFO of Marshall Technology Incorporated is
lediasite Collection\ EFIS Tools\ licrosoft Teams asses\ oom Pro 1.3\ ore Curriculum ssessment\ fourse Evaluations\ Jourse Materials\ Landon, the CFO of Marshall Technology Incorporated is planning next year's capital budget. It is at its optimal capital structure, which is 15 percent debt and 85 percent common equity, and the company's earnings and dividends are growing at a constant rate of 12 percent. The last dividend,
D_(O)
, was
$1.00
, and the company's stock currently sells at a price of
$22
per share. The firm can raise debt at a 9 percent before
tax
cost, and is projecting net income to be
$2,400,000
with a dividend payout ratio of 25 percent. If the firm issues new common stock, a 7 percent flotation cost will be incurred. The firm's marginal tax rate is 40 percent.\ i What is the cost of retained earnings?\ a. 15.42 percent\ b. 15.78 percent\ c. 16.54 percent\ d. 16.88 percent\ c. 17.09 percent
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