Northeast Airlines (NA) has a current dividend of $1.80.Dividends are expected to grow at a rate of 7 percent a year into the foreseeable future.What is NA's cost of external equity if its stock can be sold to net $46 a share?

Name: Northeast Airlines (NA) has a current dividend of $1.80.Dividends are expected to grow at a rate of 7 percent a year into the foreseeable future.What is NA's cost of external equity if its stock can be sold to net $46 a share?
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Quizplus · Accepted Answer

kₑ = $1.80(1.07)/$46 + 0.07 = 0.112 or 11.2%

Northeast Airlines (NA) Has a Current Dividend of $1