What is the firm's cost of equity on these accounting question? ABC Inc. is expected to pay an annual dividend of R0.80a share next year. The market price of the share isR22.40 and the growth rate is 5%.What is the firm's cost of equity?a. 7.6%b. 7.9%c. 8.2%d. 8.6%

Step 1: The Dividend Growth Model formula is:Cost of Equity = (Dividend / Market Price) + Growth…

Answered: ABC Inc. is expected to pay an annual…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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ABC Inc. is expected to pay an annual dividend of R0.80 a share next year. The market price of the share is R22.40 and the growth rate is 5%. What is the firm's cost of equity? a. 7.6% b. 7.9% c. 8.2% d. 8.6%