(SOLVED) Assume that Combone Limited's next annual dividend will be 2.40 per share. Its current stock price is 32= per share and growth rate of earnings and dividends is 6.5%.

Question

• Assume that Combone Limited's next annual dividend will be 2.40 per share. Its current stock price is 32= per share and growth rate of earnings and dividends is 6.5%. The floatation costs are 15% of the market price

• Required 

• Compute the cost of

I. Retained earnings

II. New Common equity

Expert Solution Preview

ii) Cost of new common stock

= 14%

= (2.40 / 32) + 0.065

i) Cost of retained earnings = ......