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Wholesale Foods was started with the sale of 10,000 common shares at $100 per share. Since that time earnings of $800,000 have been retained. The
Wholesale Foods was started with the sale of 10,000 common shares at $100 per share. Since that time earnings of $800,000 have been retained. The shares are now selling for $89. The firms marginal tax rate is 30%. It pays flotation costs of 8% on all new share issues. Wolesale Foods is expected to grow at a rate of 3.5% indefinitely and recently paid an annual common dividend of $4.00. Compute the cost of capital for RETAINED EARNINGS.
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