7. Pompeii, Inc., has sales of $48,500, costs of $22,400, depreciation expense of $2,100, and interest expense of $1,850. If the
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Answer:
10.03%
Explanation:
Using the dividend discount formula, find the cost of equity; r
whereby,
D1 = Next year's dividend = 5.29
P0 = Current price of the stock = 79.83
g = growth rate of dividends = 3.40% or 0.034 as a decimal
Next, plug in the numbers to the formula above;
As a percentage, r = 10.03%
Therefore, the company's cost of equity is 10.03%