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Financial Ltd has R2 par value ordinary shares in issue which are currently trading at R30 per share. Financial Ltd is expected to pay out a dividend of R5 per share next year. Calculate the company’s cost of equity if no growth in dividends is expected (rounded to two decimal places). a. It is not possible to determine as no growth is expected. b. 6.67% c. 12.50% d. 40.00% e. 16.67%

Financial Ltd has R2 par value ordinary shares in issue which are currently trading at R30 per share. Financial Ltd is expected to pay out a dividend of R5 per share next year. Calculate the company’s cost of equity if no growth in dividends is expected (rounded to two decimal places). a. It is not possible to determine as no growth is expected. b. 6.67% c. 12.50% d. 40.00% e. 16.67%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Financial Ltd has R2 par value ordinary shares in issue which are currently trading at R30 per share. Financial Ltd is expected to pay out a dividend of R5 per share next year. Calculate the company’s cost of equity if no growth in dividends is expected (rounded to two decimal places).

a.

It is not possible to determine as no growth is expected.

b.

6.67%

c.

12.50%

d.

40.00%

e.

16.67%

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