Jumbuck Exploration has a current stock price of $2.00 and is expected to sell for $2.10 in one year'stime, immediately after it pays a dividend of $0.26. Which of the following is closest to Jumbuck Exploration's equity cost of capital?

Question

Quizplus · Accepted Answer

The equity cost of capital can be calculated using the formula: (Dividend + Price Increase) / Current Price. Here, ($0.26 + ($2.10 - $2.00)) / $2.00 = $0.36 / $2.00 = 0.18 or 18%.

Jumbuck Exploration Has a Current Stock Price of $2