- Sentry Manufacturing just paid a dividend $5
per share. The dividend is expected to grow at a constant rate of
8% per year. The price of Sentry Manufacturing's stock today is $32
per share. If Sentry Manufacturing decides to issue new common
stock, flotation costs will equal $2.70 per share. Sentry
Manufacturing's marginal tax rate is 35%. Based on the above
information, the cost of retained earnings (internal equity)
is
A)
23.72%.
B) 24.12%.
C) 24.88%.
C is the correct answer,
please show how you arrive at that answer