Question

Jackson Holding has just paid an annual dividend of $0.45 per share. Analysts expect the firm's...

Jackson Holding has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 7% forever. Its stock price is $37.8.

Question 1: What is the cost of equity from retained earnings?

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Answer #1

Cost of equity=(D1/Current price)+Growth rate

=[(0.45*1.07)/37.8]+0.07

which is equal to

=8.27%(Approx).

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