Question

Taggart Transcontinental has a divided yield of 3.5%. Taggart's equity cost of capital is 10%, and its dividends are expected to grow at a constant rate. Based on this information, Taggart's constant growth rate in dividends is closest to:

Answer 1

Taggart's constant growth rate in dividends is closest to: 6.5%

Solution:

Given,

Taggart Transcontinental has a divided yield of 3.5%

Equity cost of capital = 10%

To Find: Taggart's constant growth rate in dividends

So , we need to calculate :

= > 10% - 3.5%= 6.5%

Taggart's constant growth rate in dividends is closest to: 6.5%