Your boss is the treasurer of the company, and she expects the firm will grow at 4.00% annually in the future. She also believes that issuing bonds is less expensive than the cost of retained earnings. Your firm's debt securities have a yield to maturity of 8.50%, and the firm's marginal tax rate is 30.00%. The current market price of your firm's common stock is $19.00, and the annual dividend expected next year is $1.50 per share.
Calculate the component costs of both debt and retained earnings to see if your boss is right.

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The Answer of Your boss is the treasurer of the company, and she expects the firm will grow at 4.00% annually in the future. She also believes that issuing bonds is less expensive than the cost of retained earnings. Your firm's debt securities have a yield to maturity of 8.50%, and the firm's marginal tax rate is 30.00%. The current market price of your firm's common stock is $19.00, and the annual dividend expected next year is $1.50 per share.
Calculate the component costs of both debt and retained earnings to see if your boss is right.

Your Boss Is the Treasurer of the Company, and She