Question: Retained earnings versus new common stock Using the data for a firm shown in the following table, calculate the cost of retained earnings and the cost of new common stock using the constant-growth valuation model.
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Current market price per share
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Dividend growth rate
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Projected dividend per share next year
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Under pricing per share
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Flotation cost per share
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|
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$50.00
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8%
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$3.00
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$2.50
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$1.75
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a. The cost of retained earnings is _____%. (Round to two decimal places.)
b. The cost of new common stock is ____%. (Round to two decimal places.)