The Down and Out Co. just issued a dividend of $2.11 per share on its common sto

Question

The Down and Out Co. just issued a dividend of $2.11 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)

The Down and Out Co. just issued a dividend of $2.11 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)

The Down and Out Co. just issued a dividend of $2.11 per share on its common stock. The company is expected to maintain a constant 5 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity? (Do not round your intermediate calculations.)

Explanation / Answer

Cost of Equity= (D1/P0)+g

=((2.11*1.05)/35)+0.05

=0.1133

=11.33%

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