Riverhawk Store (RS) dividends have been growing at 3 percent annually and are expected to continue this growth rate indefinitely. The company recently paid a dividend of $1.25 per share. Next year, it expects to add $3 million to retained earnings. RP’s common stock is selling for $17.00 per share. The company is expanding and plans to sell new common stock with flotation costs of 4 percent.

What is the cost of retained earnings for the company?

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Question 12 0 out of 2 points

What is the company’s cost of new equity?

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Question 13 0 out of 2 points

If 30 percent of the equity needed is new equity and the rest will be retained earnings, what is the average cost of equity funds?

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