Texts: Complete the problem using Excel formula
D E F G H
1 J K L M A C P-17: Costs of retained earnings and new common stock LO11-3
Compute K and K under the following circumstances:
D = $5.00, P = $70, g = 8%, F = $7.00.
D = $0.22, P = $28, g = 7%, F = $2.50.
Earnings at the end of period one = $7, payout ratio equals 40%, P = $30, g = 6.0%, F = $2.20.
D (dividend at the beginning of the first period) = $6, growth rate for dividends and earnings g = 7%, P = $60, F = $3.
Note: Common stock financing is available through the retention of earnings belonging to current stockholders or by issuing new common stock; the latter is more costly due to the "Float" or selling cost.
D = Beg Per DV E = Beg Per Earn P = org price K Cost Rer Eam opportunity cost to shareholders
Given: D = End Per Div E = End Per Earn F = sell cost float K Cost Now Stock g = growth rate
a)
b)
c) 7 40%
(p
E, Payout Ratio: Do D. 9 P. F K K
6 = D(1 + g) 7.0% 60.00 3.00 = D / P + g D / (P - F) + g
5 8.0% 70.00 7.00
0.22 7.0% 28.00 2.50
10 11 12 13 14
6.0% 30.00 2.20