Suppose that your company is expected to pay a dividend of $1.50 per share next year. The growth in dividend has been steady at 5.1% p.a. and the market expects this growth to continue. If the share is priced at $25 per share, is a 4% cost of equity tenable?

Suppose that your company is expected to pay a dividend of $1.50 per share next year. The growth in dividend has been steady at 5.1% p.a. and the market expects this growth to continue. If the share is priced at $25 per share, is a 4% cost of equity tenable?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 5P: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s...

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Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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