Murray Motor Company wants you to calculate its cost of common stock . During the next 12

Question:

Murray Motor Company wants you to calculate its cost of . During the next 12 months, the company expects to pay dividends (D1) of $2.50 per share, and the current price of its is $50 per share. The expected growth rate is 8 percent.
a. Compute the cost of retained earnings (Ke). Use Formula 11-6.
b. If a $3 flotation cost is involved, compute the cost of new (Kn). Use Formula 11-7.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...