EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 11, Problem 8PROB
Summary Introduction
Cost of
Cost incurred by the company by using retained earnings, instead of declaring dividend to common stock holders.
Calculate the cost of retained earnings as follows:
Cost of new common stock is the cost incurred by the company for issue new common stock.
Calculate the cost new common stock as follows:
TTH has growth rate of 4% and current price is $34 and paid a recent dividend of 4.25. Flotation cost for issuing the new common stock is 8.5%.
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