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Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth...

Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth of 5% per year for the indefinite future. Its last dividend was $6 per share; the stock sold for $50 per share just after the dividend was paid. What is the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
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Answer #1

As per the dividend growth model, the cost of equity is:

=Dividend year 1/Price year 0 + growth rate

=((6*1.05)/50)+0.05

=17.60%

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