A company is expected to provide a steady growth of dividends of 5% per year for the indefinite future , its last dividend was 5$ per share , the stock sold for 60$ just after the dividend was paid , what is company’s cost of equity ? It would be really nice if you guys show me ur calculation also coz its either a publisher mistake or for sure i am missing something which i cant see thanks !
P = D1 / (k - g) P = 60 D1 = 5 * 1.05 k = ? g = .05 60 = 5.25 / ( k - .05) k = .14 Should note rounding to 2 decimals.
P1 Dividend = 1.05*5 = 5.25 g = 5% P0 = 60 Ke = ? 5.25 / (x-0.05) = 60 60x - 3 = 5.25 60x = 8.25 x = 13.75%
5.25= 5*1.05 60 = 5.25/(k-.05) k= (5.25/60)+.05 k=13.75%
tkssss 