What is the cost of equity from retained earnings

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Reference no: EM131522513

Part A:

Assume that Kish Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $0.90; P0 = $47.50; and g = 7.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations.

Part B:

Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67; P0 = $45.00; and g = 8.00% (constant). What is the cost of equity from retained earnings based on the DCF approach?

Part C:

XYZ has a target capital structure of 62 percent common equity and the rest long term debt. The company's outstanding bonds have a yield to maturity of 7.9 percent. The company's common stock sells for $69.24 per share and are expected to pay a dividend of $1.51 this year. Those dividends are expected to continue to grow at a constant rate of 14.8 percent. Given its tax rate of 40 percent, what is XYZ's weighted average cost of capital? (Show your answer in decimal for to three places, e.g., 12.3% would be entered as 0.123)

Reference no: EM131522513

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