Luther Industries has a dividend yield of 4.5% and and a cost of equity capital of 12%.Luther Industries' dividends are expected to grow at a constant rate indefinitely.The growth rate of Luther's dividends are closest to:

Question

Quizplus · Accepted Answer

The growth rate of dividends can be calculated using the formula: Cost of Equity = Dividend Yield + Growth Rate. Rearranging gives Growth Rate = Cost of Equity - Dividend Yield = 12% - 4.5% = 7.5%.

Luther Industries Has a Dividend Yield of 4