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What is geo cost of equity from retained earnings

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The stock of Geo Company sells for $42.50, most recent dividend was $1.25. A flotation cost of 10% would be required to issue new common stock. Security analysts are projecting that the common dividend will grow at a rate of 7% a year. The yield on 10 year Govt. bond is 4.00% and 3-month T-bill is 2.00%. The beta for Geo's stock is 1.10 and the expected stock market return is 10.50%. The appropriate bond risk premium is 4.0% for the bond-yield-plus risk premium approach. The yield on Geo Company's bond is 5.50%.

What is Geo's cost of equity from retained earnings using the bond yield plus risk premium approach?

Reference no: EM132818101

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