A stock sells for $30. The next dividend will be $6 per share. If the return on
ID: 2711922 • Letter: A
Question
A stock sells for $30. The next dividend will be $6 per share. If the return on equity ROE is a constant 15% and the company reinvests 20% of earnings in the firm, what must be the opportunity cost of capital? (Do not round intermediate calculations.)
A stock sells for $30. The next dividend will be $6 per share. If the return on equity ROE is a constant 15% and the company reinvests 20% of earnings in the firm, what must be the opportunity cost of capital? (Do not round intermediate calculations.)
Explanation / Answer
sell $30 Dividend $6 Total $36 Return 15% retun 5.40% reinvestment 1. 8
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