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Cost of retained earnings
shraddha, India
My question is how to calculate cost of capital in case a company has its funds only through equity shares & its reserves?
Then how to calculate cost of retained earnings (reserves). As it is a major constituent of company's long term funds.
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Reply to Question Regarding Retained Earningsbhavik, Student (MBA), India The retained earnings can be calculated as follows:
K'E(i.e. Cost of retained earnings) = KE * (1 - F)
Where KE = Cost of Equity, F = Flotation cost
In case flotation cost is not given you may take KE = K'E
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