Ask Question
8 November, 12:30

If the dividends to be paid in one year on a common stock issue are $3.50 per share, the current price of the stock is $50, and the expected growth rate in dividends is 6%, what is the cost of common stock?

+1
Answers (1)
  1. 8 November, 16:10
    0
    Answer: Ke = D1/Po + g

    Ke = $3.50/$50 + 0.06

    Ke = 0.07 + 0.06

    Ke = 0.13 = 13%

    Explanation: Cost of equity is a function of dividend in 1 year's time divided by the current market price plus growth rate. D1 represents dividend in 1 year's time, Po denotes the current market price and g is the growth rate.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “If the dividends to be paid in one year on a common stock issue are $3.50 per share, the current price of the stock is $50, and the ...” 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