Explain the following quote "The rich rule over the poor, and the borrower is slave to the lender."
2 answers:
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Answer:
A). 17.13 %
Explanation:
Given that,
Annual Dividend for the first year = $.58,
Annual Dividend for the second year = $.66
Annual Dividend for the third year = $.72
Annual Dividend for the fourth year = $.75
The current price per share = $10.08
To find;
The cost of equity = ?
Procedure:
(0.66 - 0.58)/0.58 = 0.137931034
(0.72 - 0.66)/0.66 = 0. 0909090909
(0.75 - 0.72)/0.72 = 0.0416666667
g = (0.137931034 + 0. 0909090909 + 0.0416666667)/3
= 0.0901689305
= {(0.75 * 1.0901689305)/10.08} + 0.0901689305
= 0.17128269
∵ 17.13% is the cost of equity.