Amy Jolly is the treasurer of her company. She expects the company will grow at 4% in the future, and debt securities (YTM=14%, tax rate=30%) will always be a cheaper option to finance the growth. The current market price per share of its common stock is $39, and the expected dividend in one year is $1.50 per share. Calculate the cost of the company's retained earnings and check if Amy's assumption is correct.