You have the following data: D₁ = $1.30; P₀ = $42.50; and g = 7.00% (constant).What is the cost of equity from retained earnings based on the DCF approach?

Question

Quizplus · Accepted Answer

First, we need to calculate the growth rate (g) using the Gordon Growth Model: g = D₁ / P₀ = 1.30 / 42.50 = 3.06% Then, we can use the DCF method to calculate the cost of equity from retained earnings: kE = (D₁ / P₀) + g = 3.06% + 7.00% = 10.06% Therefore, the answer is C (10.06%).

You Have the Following Data: D1 = $1

You Have the Following Data: D₁ = $1