1. If the dividends to be paid in one year on a common stock issue are...

Question

Question

1. If the dividends to be paid in one year on a common stock issue are $4.00 per share, the cost of equity is 15%, and curren

Answer 1

Answer #1

value = dividend next year/(Required return - growth rate)

=>

40 = 4/(0.15 - growth rate)

=>

growth rate = 0.15 - 4/40

= 0.15 - 0.1

= 0.05

= 5%

hence choose A)

Answer 2

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