Question

ing: 1:00:55 Save Submit Test for Grading Question 17 of 24 Rivoli Inc. hired you as a consultant to help estimate its cost of capital. You have been provided with the following data: Do - $0.80; P - $57.50; and g - 8.00% (constant). Based on the DCF approach, what is the cost of equity from retained earnings? Do not round your intermediate calculations. a. 10.17% 5. b. 9.50% Soc. 10.07% O d. 11.02% e. 7.98% . 0 Icow Key

Answer 1

rate positively ..

	Expected dividend near year =		0.864
	0.80*108%
	using DDM we can compute the cost of equity
	Cost of equity =	expected dividend next year/Price today + Growth rate
		=0.864/57.5+8%
		9.50%
	ans = option b.	9.50%