Homework Answers
8. Price = Expected Dividend / (Cost of Capital-Growth Rate)
$ 22 = $0.81 / (Cost of Capital-4.2%)
(Cost of Capital-4.2%) = 0.81 / 22
Cost of Capital = [0.81 / 22] + 4.2%
= 7.8818%
=7.9%
Hence the correct answer is 7.9%
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