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Calculate the cost of retained earnings or internal equity

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Reference no: EM13573771

Cost of Retained Earnings (or Internal Equity). Epsilon Company's last annual dividend was $4 per share, and both earnings and dividends are expected to grow at a constant rate of 8 percent. The stock now sells for $50 per share. The company's beta coefficient is 1.5. The return of a market portfolio is 12 percent, and the risk-free rate is 8 percent. The company's A-rated bonds are yielding 12 percent. Calculate the cost of retained earnings (or internal equity) using: (a) the Gordon's growth model; (b) the bond plus method; and (c) the capital asset pricing model.

Reference no: EM13573771

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