The Shoe Outlet has paid annual dividends of $0.65,$0.70,$0.72,and $0.75 per share over the last four years,respectively.The stock is currently selling for $26 a share.What is this firm's cost of equity?

Question

Quizplus · Accepted Answer

($0.70 - $0.65)/$0.65 = 0.076923($0.72 - $0.70)/$0.70 = 0.028571($0.75 - $0.72)/$0.72 = 0.041667g = (0.076923 + 0.028571 + 0.041667)/3 = .049054R_e = [($0.75 × 1.049054)/$26] + .049054 = 7.93 percent

The Shoe Outlet Has Paid Annual Dividends of $0