Cost of retained earnings : 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 retained earnings = Expected dividend Current price 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: Cost retained earnings = Expected dividend Current price × ( 1 − Flotation cost ) CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

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Answer 1

Question

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

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Answer 2

Question

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

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Answer 3

Question

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

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Answer 4

Question

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

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Answer 5

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

Answer 6

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

Answer 7

Chapter 11, Problem 9PROB

Summary Introduction

Cost of retained earnings:

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 retained earnings=Expected dividendCurrent price

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:

Cost retained earnings=Expected dividendCurrent price×(1−Flotation cost)

CE has current price is $50 and expected dividend of $6. Flotation cost for issuing the new common stock is 7%.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 11 - Prob. 1PROB Ch. 11 - Prob. 2PROB Ch. 11 - Prob. 3PROB Ch. 11 - Prob. 4PROB Ch. 11 - Prob. 5PROB Ch. 11 - Prob. 6PROB Ch. 11 - Prob. 7PROB Ch. 11 - Prob. 8PROB Ch. 11 - Prob. 9PROB Ch. 11 - Prob. 10PROB

Solution Summary: The author calculates the cost of retained earnings, instead of declaring dividend to common stock holders.

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