Question

Countess Corp. is expected to pay an annual dividend of $4.45 on its common stock in one year. The current stock price is $72.55 per share. The company announced that it will increase its dividend by 3.60 percent annually. What is the company's cost of equity

Answer 1

Answer:

9.73%

Explanation:

The cost of equity formula is stated thus:

cost of equity=D1/P0+g

D1=future expected dividend payment=$4.45

P0=current stock price=$72.55

g=dividend constant growth rate=3.60%

cost of equity=($4.45/$72.55)+3.60%

cost of equity=6.13% +3.60%

cost of equity=9.73%