Ask Question
16 November, 11:17

Cullumber Wok Co. is expected to pay a dividend of $1.80 one year from today on its common shares. That dividend is expected to increase by 5.00 percent every year thereafter. If the price of Cullumber common stock is $20.00, what is the cost of its common equity capital?

A. Cost of common equity

%

+5
Answers (1)
  1. 16 November, 12:40
    0
    14.00%

    Explanation:

    Given that,

    Expected Dividend = $1.80

    Expected Growth Rate of dividend = 5%

    Price of Cullumber common stock = $20.00

    Cost of Common Equity = (Expected Dividend : Current Price) + Growth Rate

    = (1.80 : 20) + 5%

    = 0.09 + 5%

    = 14.00%

    Therefore, the cost of its common equity capital is 14%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Cullumber Wok Co. is expected to pay a dividend of $1.80 one year from today on its common shares. That dividend is expected to increase by ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers