Answer: the loss of potential gain from other alternatives when one alternative is chosen
Explanation:
A. You have already paid taxes on the money, so it will grow tax free.
I’m confused about the question
Answer:
6.91%
Explanation:
The formula for share price using the dividend growth model stated below can be used to determine the cost of equity as well whereby the formula is rearranged in order to make the cost of equity the subject as shown thus:
share price=expected dividend/(cost of equity-growth rate)
share price=$45
expected dividend=last dividend*(1+dividend growth rate)
expected dividend=$0.60*(1+5.5%)=0.633
cost of equity=the unknown
dividend growth rate=5.5%
45=0.633/(cost of equity-5.5%)
45*(cost of equity-5.5%)=0.633
cost of equity-5.5%=0.633/45
cost of equity=(0.633/45)+5.5%
cost of equity=6.91%
