Homework Answers
| Current price of share = | $ 45 |
| Last Dividend paid = | $ 1.5 |
| Dividend growth rate = | 10% |
| Floatation Cost= | $ 3.75 |
| Cost of equity= | {D(1+g)/Po}+g |
| {1.5(1+0.1)/(45-3.75)}+0.1 | |
| {1.65/41.25}+0.1 | |
| 0.14 | |
| 14% |
Therefore answer is 14%.
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