Whitewall Tire Co. just paid an annual dividend of $1.30 on its common shares. I

Question

Whitewall Tire Co. just paid an annual dividend of $1.30 on its common shares. If Whitewall is expected to increase its annual dividend by 6.60 percent per year into the foreseeable future and the current price of Whitewall

Whitewall Tire Co. just paid an annual dividend of $1.30 on its common shares. If Whitewall is expected to increase its annual dividend by 6.60 percent per year into the foreseeable future and the current price of Whitewall?????s common shares is $14.08, what is the cost of common stock for Whitewall? (Round answer to 2 decimal places, e.g. 15.25%.)

Explanation / Answer

Using the Dividend discount model, we have

$14.08 = [$1.30 * (1.066)] / K

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