Compute the cost of new common stock

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Reference no: EM132020252

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D₁) of $1.90 per share, and the current price of its common stock is $38 per share. The expected growth rate is 10 percent.

a. Compute the cost of retained earnings (K_e). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. If a $2 flotation cost is involved, compute the cost of new common stock (K_n). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM132020252

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