Solution-Determine the cost of retained earnings to Diouf

Determine the cost of retained earnings to Diouf Corporation

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Question - Diouf Corporation is estimating its cost of common stock financing. Financial analysts are forecasting that Diouf's next dividend will be $2.50, and that the dividend will grow at a rate of 8% for the foreseeable future. The company's stock is currently selling for $50/share. Diouf's investment bankers have advised that a new stock issue would incur flotation costs of 6% of the issue.

a) Determine the common stock investors' required rate of return

b) Determine the cost of retained earnings to Diouf Corporation.

C) Determine the cost of a new stock issue to Diouf Corporation.

Edu Company's finances itself only with bonds and common stock. Its shareholders require a 22.5% return, and its bondholders require a 14% return. Based on a 50% debt ratio, no flotation costs, and a 21% tax rate, find Edu's weighted-average cost of capital (WACC).

Reference no: EM132969089

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Determine the cost of retained earnings to Diouf Corporation

Reference no: EM132969089

Reference no: EM132969089

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