Cost of equity financing problem using Gordon Model approach

label Business & Finance
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schedule 1 Day
account_balance_wallet $5

Heavy Rain Corporation just paid a dividend of $2.95 per share, and the firm is expected to experience constant growth of 2.21% over the foreseeable future. The common stock is currently selling for $69.90 per share. What is Heavy Rain’s cost of retained earnings using the Gordon Model (DDM) approach?

Round the answers to two decimal places in percentage form. 

Sep 28th, 2015

Thank you for the opportunity to help you with your question!

Gordon model  for cost of equity=  latest dividend yield +  the constant  growth rate =  2.95/69.90 + 2.21%= 6.43%

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Sep 28th, 2015

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