The Lumber Shack just paid an annual dividend of $1.23 a share.The dividend growth rate is 4 percent,the tax rate is 34 percent,and the common stock sells for $38 a share.What is the cost of equity?

Name: The Lumber Shack just paid an annual dividend of $1.23 a share.The dividend growth rate is 4 percent,the tax rate is 34 percent,and the common stock sells for $38 a share.What is the cost of equity?
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

Quizplus · Accepted Answer

R_S = ($1.23 × 1.04)/ $38 + 0.04 = 0.0737,or 7.37%

The Lumber Shack Just Paid an Annual Dividend of $1