Problem 4 Retained Earnings versus New Common Stock Using the data shown in the following table, calculate each firms a Cost of retained earnings () b Cost of new common stock () Firm Market price per share Dividend growth rate Do underpricing per share floatation cost per share A $80 8 $2 80 $2 $1 00 B $30 6 1 50 $1 00 $1 80 C $45 7 2 40 $1 50 $2 00 D $22 4 2 10 $2 50 $1 75

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Question: Problem 4: Retained Earnings versus New Common Stock Using the data shown in the following table, calculate each firms: a. Cost of retained earnings ()

Problem 4: Retained Earnings versus New Common Stock Using the data shown in the following table, calculate each firms: a. Cost of retained earnings () b. Cost of new common stock ()

Firm	Market price per share	Dividend growth rate	Do	underpricing per share	floatation cost per share
A	$80	8%	$2.80	$2	$1.00
B	$30	6%	1.50	$1.00	$1.80
C	$45	7%	2.40	$1.50	$2.00
D	$22	4%	2.10	$2.50	$1.75

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