Question 10: Please estimate the cost of common equity. You have been provided with the following...
Question 10:
Please estimate the cost of common equity.
You have been provided with the following data: D0 = $0.80; P0 = $22.50; and gL = 8.00% (constant). Based on the dividend growth model, what is the cost of common from reinvested earnings?
Homework Answers
Div1 = Div0 * (1 + g) = $0.80 * (1 + 8%) = $0.864
r - 0.08 = 0.0384
Cost of Equity, r = 11.84%
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