A firm's stock is selling for $79. The next annual dividend is expected to be $2.00. The growth rate is 11%. The flotation cost is $7. What is the cost of retained earnings?

13.53%

Explanation:

The following information can be gotten from the question:

Price of stock, Po = $79

Growth rate, g = 11%%

Dividend, D1 = $2.00

Ks = Unknown

Po =D1/(Ks-g)

Therefore, Ks = g + D1/P0

= 11% + 2.00/79

= 0.11 + 0.0253

= 0.1353

= 13.53%

Floataton cost is not relevant here as it is used only for Issue of stock.

since the options are not listed, when you are working on your budget you should also add water, tv, internet, miscellaneous and your 'fun' money for in your budget. when budgeting, you need to allow for fun money, and mis/accidental money so that you stick to the budget and not go crazy because you feel strapped to the budget.