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Cost of Retained Earnings Formula

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Cost of Retained Earnings represents the return that shareholders could have earned if the company had distributed the earnings as dividends instead of retaining them. Check FAQs

C RE = (\frac{D}{P c}) + g

C_RE - Cost of Retained Earnings?D - Dividend?P_c - Current Stock Price?g - Growth Rate?

Cost of Retained Earnings Example

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Here is how the Cost of Retained Earnings equation looks like with Values.

Here is how the Cost of Retained Earnings equation looks like with Units.

Here is how the Cost of Retained Earnings equation looks like.

0.7 = (\frac{25}{50}) + 0.2

0.7 = (\frac{25}{50}) + 0.2

0.7 = (\frac{25}{50}) + 0.2

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Cost of Retained Earnings Solution

Follow our step by step solution on how to calculate Cost of Retained Earnings?

FIRST Step Consider the formula

C RE = (\frac{D}{P c}) + g

Next Step Substitute values of Variables

∴

C RE = (\frac{25}{50}) + 0.2

Next Step Prepare to Evaluate

∴

C RE = (\frac{25}{50}) + 0.2

LAST Step Evaluate

∴

C RE = 0.7

Cost of Retained Earnings Formula Elements

Variables

Cost of Retained Earnings

Cost of Retained Earnings represents the return that shareholders could have earned if the company had distributed the earnings as dividends instead of retaining them.

Symbol: C_RE

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cost of Retained Earnings

Dividend

Dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Symbol: D

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Dividend

Current Stock Price

Current Stock Price is the present purchase price of security.

Symbol: P_c

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Current Stock Price

Growth Rate

Growth Rates refer to the percentage change of a specific variable within a specific time period, given a certain context.

Symbol: g

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Growth Rate

Other formulas in Capital Budgeting category

Go Payback Period

PBP = \frac{Initial Invt}{C f}

Go Cost of Debt

R d = Int.E \cdot (1 - T r)

Go After-Tax Cost of Debt

ATCD = (R f + CS P) \cdot (1 - T r)

Go Accounting Rate of Return

ARR = (\frac{AP}{Initial Invt}) \cdot 100

How to Evaluate Cost of Retained Earnings?

Cost of Retained Earnings evaluator uses Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate to evaluate the Cost of Retained Earnings, The Cost of Retained Earnings formula is defined as an opportunity cost, representing the return shareholders could have earned if they had received the retained earnings as dividends and invested them elsewhere. Cost of Retained Earnings is denoted by C_RE symbol.

How to evaluate Cost of Retained Earnings using this online evaluator? To use this online evaluator for Cost of Retained Earnings, enter Dividend (D), Current Stock Price (P_c) & Growth Rate (g) and hit the calculate button.

FAQs on Cost of Retained Earnings

What is the formula to find Cost of Retained Earnings?

The formula of Cost of Retained Earnings is expressed as Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate. Here is an example- 0.698008 = (25/50)+0.2.

How to calculate Cost of Retained Earnings?

With Dividend (D), Current Stock Price (P_c) & Growth Rate (g) we can find Cost of Retained Earnings using the formula - Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate.

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Cost of Retained Earnings Formula

Cost of Retained Earnings Example

Cost of Retained Earnings Solution

Cost of Retained Earnings Formula Elements

Other formulas in Capital Budgeting category

How to Evaluate Cost of Retained Earnings?

FAQs on Cost of Retained Earnings

Variable Name