A firm has just paid its annual dividend of $5.64 a share.Thereafter the dividend is expected to increase at a rate of 2% a year.If the firm's stock currently sells for $60 a share,what is the cost of equity?

Name: A firm has just paid its annual dividend of $5.64 a share.Thereafter the dividend is expected to increase at a rate of 2% a year.If the firm's stock currently sells for $60 a share,what is the cost of equity?
Brand: Quizplus
Rating: 4.8 (55 reviews)

Question

Quizplus · Accepted Answer

r_e = ($5.64 × 1.02) / $60 + 0.02 = 0.11588, or 11.59%

A Firm Has Just Paid Its Annual Dividend of $5