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Assume that GBIST Inc. hired you as a consultant to help estimate its cost of capital....

Assume that GBIST Inc. hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D0 = $1.20; P0 = $1,200.00; and g = 6.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings?

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Answer #1

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

=[(1.2*1.06)/1200]+0.06

which is equal to

=6.106%

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