The dividend just paid on Thompson Industry stock was $2 per share and it is expected to grow 8% each year.If the stock is currently selling at $30 per share,what is Thompson's cost of equity? (Round to the nearest percent.)

Question

Quizplus · Accepted Answer

Step 1 - Compute D₁. D₁ = D₀(1 + g) D₁ = $2(1.08) = $2.16 Step 2 - Use the constant growth model to estimate the cost of equity. k_e = 11ea7fdb_fc6b_a5bc_a768_c35769aed4cf_TB2902_11 + g k_e = 11ea7fdb_fc6b_a5bd_a768_8fffc48d09a6_TB2902_11 + .08 k_e = 0.152 or 15%

The Dividend Just Paid on Thompson Industry Stock Was $2