If a company is currently paying common share dividends to investors and those dividends are expected to grow at a low but steady rate in the future, then the cost of common equity for the company can be determined by also using the current price of the company's common shares.

Question

Quizplus · Accepted Answer

The cost of common equity can be calculated using the dividend growth model, which considers the current dividend, the expected dividend growth rate, and the current market price of the stock. Therefore, if a company is currently paying common share dividends that are expected to grow at a low but steady rate in the future, the cost of common equity can be determined using the current market price of the company's common shares.

If a Company Is Currently Paying Common Share Dividends to Investors