## Cost of Retained Earnings Solution

STEP 0: Pre-Calculation Summary
Formula Used
Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate
CRE = (D/Pc)+g
This formula uses 4 Variables
Variables Used
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.
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.
Current Stock Price - Current Stock Price is the present purchase price of security.
Growth Rate - Growth Rates refer to the percentage change of a specific variable within a specific time period, given a certain context.
STEP 1: Convert Input(s) to Base Unit
Dividend: 25 --> No Conversion Required
Current Stock Price: 50 --> No Conversion Required
Growth Rate: 0.2 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
CRE = (D/Pc)+g --> (25/50)+0.2
Evaluating ... ...
CRE = 0.7
STEP 3: Convert Result to Output's Unit
0.7 --> No Conversion Required
0.7 <-- Cost of Retained Earnings
(Calculation completed in 00.004 seconds)
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## Credits

Created by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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Satyawati College (DU), New Delhi
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## <Capital Budgeting Calculators

Cost of Retained Earnings
​ Go Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate
After-Tax Cost of Debt
​ Go After Tax Cost of Debt = (Risk Free Rate+Credit Spread)*(1-Tax Rate)
Payback Period
​ Go Payback Period = Initial Investment/Cashflow per Period
Cost of Debt
​ Go Cost of Debt = Interest Expense*(1-Tax Rate)

## Cost of Retained Earnings Formula

Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate
CRE = (D/Pc)+g

## What is Cost of Retained Earnings?

The cost of retained earnings, also known as the opportunity 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. It is a crucial concept in financial management because retained earnings are funds that could have been distributed to shareholders but are instead reinvested in the company for growth or other purposes.

Calculating the cost of retained earnings can be complex and depends on various factors such as the company's cost of equity, the rate of return expected by shareholders, and the alternative investment opportunities available to them. One common approach to estimating the cost of retained earnings is to use the capital asset pricing model (CAPM) or other models used to calculate the cost of equity.

## How to Calculate Cost of Retained Earnings?

Cost of Retained Earnings calculator uses Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate to calculate 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 CRE symbol.

How to calculate Cost of Retained Earnings using this online calculator? To use this online calculator for Cost of Retained Earnings, enter Dividend (D), Current Stock Price (Pc) & Growth Rate (g) and hit the calculate button. Here is how the Cost of Retained Earnings calculation can be explained with given input values -> 0.698008 = (25/50)+0.2.

### FAQ

What is 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 and is represented as CRE = (D/Pc)+g or Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate. Dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders, Current Stock Price is the present purchase price of security & Growth Rates refer to the percentage change of a specific variable within a specific time period, given a certain context.
How to calculate 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 is calculated using Cost of Retained Earnings = (Dividend/Current Stock Price)+Growth Rate. To calculate Cost of Retained Earnings, you need Dividend (D), Current Stock Price (Pc) & Growth Rate (g). With our tool, you need to enter the respective value for Dividend, Current Stock Price & Growth Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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