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Problem 11-16(Algo) Costs of retained earnings and new common stock [LO11-3] Murray Motor...

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Accounting

Problem 11-16(Algo) Costs of retained earnings and new common stock [LO11-3]
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 $4.00 per share, and the current price of its common stock is
$82 per share. The expected growth rate is 10 percent.
a. Compute the cost of retained earnings (Ke).
Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal
places.
Cost of retained earnings
b. If a $4 flotation cost is involved, compute the cost of new common stock (Kn).
Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal
places.
Cost of new common stock
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