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Finance

Question Description

A new common stock issue that paid a $1.76 dividend last year. The firm's dividends are expected to continue to grow at 6.5% per year forever. The price of the firm's common stock is now 27.62. The cost of capital from the common equity is?

Final Answer

Cost of Equity Capital = D0*(1+g)/Price + g = (1.76*(1.065)/27.62) + .065 = 13.286%

Purdue University

Anonymous
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