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Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth...

Reliable Electric is a regulated public utility, and it is expected to provide steady dividend growth of 4% per year for the indefinite future. Its last dividend was $5 per share; the stock sold for $40 per share just after the dividend was paid. What is the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

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Answer #1

cost of equity=(D1/Current price)+Growth rate

=(5*1.04)/40+0.04

which is equal to

=17%

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