cost of equity 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 $3.77 per share, and the firm is expected to experience constant growth of 4.52% over the foreseeable future. The common stock is currently selling for $79.58 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. 

Oct 4th, 2015

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

Cost of retained earnings= D(1+g)/Po +g

where; D= last dividend per share

            Po= current market of stock price per share

            g= constant growth rate of dividends

Re= $3.77(1+0.0452)/ $79.58 +0.0452

Cost of Re= 0.094715

                  = 9.47%  

Please let me know if you need any clarification. I'm always happy to answer your questions.
Oct 4th, 2015

Thank you. This was very helpful!

Oct 4th, 2015

Can you help me with the other questions I've posted? Thank you. 

Oct 4th, 2015

Welkam. I will try my best to help you

 

Oct 4th, 2015

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