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MaRussiya [10]
2 years ago
6

Slow​ 'n Steady,​ Inc., has a stock price of $ 34​, will pay a dividend next year of $ 3.10​, and has expected dividend growth o

f 1.8 % per year. What is your estimate of Slow​ 'n Steady's cost of equity​ capital?
Business
1 answer:
erica [24]2 years ago
3 0

Answer:

10.92%

Explanation:

The formula and the computation of the estimated cost of equity capital is shown below:

Stock price = Next year dividend ÷ (cost of equity - expected dividend growth rate)

We assume the cost of equity be X

$34 = $3.10  ÷ (cost of equity - 1.8%)

$34 X - $34 × 1.8X = $3.10

After solving this,

The cost of equity would be 10.92%

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