Question

MC algo 12-2 Cost Of Equity - DDM Countess Corp. is expected to pay an annual dividend of $5.17 on its common stock in one year. The current stock price is $78.79 per share. The company announced that it will increase its dividend by 3.50 percent annually. What is the company's cost of equity? Ο Ο 978% Ο 10.06% Ο 10.29% Ο 9.50% Ο 10.67%

Answer 1

Cost of Equity = [ Expected Dividend / Current Price] + Growth rate

=[ $ 5.17 / $ 78.79] + 3.50%

= 10.06%

Hence the correct answer is 10.06%