Theta Analytics is currently traded at $27.28 per share. Theta anticipates paying a cash dividend of...
Theta Analytics is currently traded at $27.28 per share. Theta anticipates paying a cash dividend of $2.71 at the end of the year, with that amount growing at 3.6 percent per year forever after. What is the cost of equity capital in percent?
Homework Answers
Current stock price (P0) = $27.28
Dividend after year 1 (D1) = $2.71
Dividend growth rate (g) = 3.6%
Cost of equity (Ke) = ?
Ke = D1/P0 + g
= 2.71/27.28 + 0.036
= 0.0993 + 0.036
= 0.1353
= 13.53%
Cost of equity (Ke) = 13.53%
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