a consultant to Basso Inc., you have been provided with the following data: D1 = $0.67; P0 = $27.50; and g = 8.00% (constant) What is the cost of common from retained earnings based on the DCF approach?
A) 9.42%
B) 9.91%
C) 10.44%
D) 10.96%
E) 11.51%

Question

Quizplus · Accepted Answer

The cost of common equity from retained earnings using the DCF approach is calculated as: (D1 / P0) + g = ($0.67 / $27.50) + 0.08 = 0.02436 + 0.08 = 0.10436 or 10.44%.

A Consultant to Basso Inc