Last week, Aristotle's Electronics paid an annual dividend of $2.87 on its common stock. The company...
Last week, Aristotle's Electronics paid an annual dividend of
$2.87 on its common stock. The company has a longstanding policy of
increasing its dividend by 3.7 percent annually. This policy is
expected to continue. What is the firm's cost of equity (in
percents) if the stock is currently selling for $47 a
share?
Homework Answers
Cost of equity=Last Dividend*(1+growth rate)/Current share price+growth rate=2.87*(1+3.7%)/47+3.7%=10.03%
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