The Down and Out Co. just issued a dividend of $2.91 per share on its common sto

Question

The Down and Out Co. just issued a dividend of $2.91 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $55 a share, what is the company's cost of equity?

The Down and Out Co. just issued a dividend of $2.91 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $55 a share, what is the company's cost of equity?

Explanation / Answer

cost of equity=(Dividend for next period/Current price)+Growth rate

=(2.91*1.05)/55+0.05

=10.56%(Approx)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.