Question
Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D 1
Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D1) of $1.70 per share, and the current price of its common stock is $34 per share. The expected growth rate is 8 percent.
a. | Compute the cost of retained earnings (Ke). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) |
Cost of retained earnings | % |
b. | If a $2 flotation cost is involved, compute the cost of new common stock (Kn). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) |
Cost of new common stock | % |
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