You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity.You obtained the following data: D₁ = $1.25; P₀ = $27.50; g = 5.00% (constant); and F = 6.00%.What is the cost of equity raised by selling new common stock? A) 9.06% B) 9.44% C) 9.84% D) 10.23% E) 10.64%

Question

Quizplus · Accepted Answer

$$\begin{array} { l r } 
\mathrm { P } _ { 1 } & \$ 1.25 \
\mathrm { P } _ { 0 } & \$ 27.50 \
\mathrm {g} & 5.00 \% \
\mathrm {F} & 6.00 \% \
\mathrm { I } _ { 1 } = \mathrm { D } _ { 1 } / \left( \mathrm { P } _ { 0 } \times ( 1 - \mathrm { F } ) + \mathrm { g } = \right. & 9.84 \%
\end{array}$$

You Are a Finance Intern at Chambers and Sons and They