Brookes Corporation has an expected dividend (D₁) of $1.60, a current stock price (Po) of $40, and a constant growth rate of 7.4%. If new common stock is issued, the company will incur flotation costs of 6%. What is the company's cost of retained earnings?
Brookes Corporation has an expected dividend (D₁) of $1.60, a current stock price (Po) of $40, and a constant growth rate of 7.4%. If new common stock is issued, the company will incur flotation costs of 6%. What is the company's cost of retained earnings?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Brookes Corporation has an expected dividend (D₁) of $1.60, a current stock price (Po) of $40, and a
constant growth rate of 7.4%. If new common stock is issued, the company will incur flotation costs of 6%.
What is the company's cost of retained earnings?
Your answer should be between 9.28 and 12.82, rounded to 2 decimal places, with no special characters.
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