# Question: Murray Motor Company wants you to calculate its cost of

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 $2.50 per share, and the current price of its common stock 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 common stock (Kn). Use Formula 11-7.

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 common stock (Kn). Use Formula 11-7.

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