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judy's boutique just paid an annual dividend of $2.71 on its common stock. the firm increases its dividend by 3.45 percent annually. what is the company's cost of equity if the current stock price is $39.88 per share?

Respuesta :

If the current share price is $39.88, the cost of equity for the corporation would be 10.1%.

What is current share price?

Current share price is the last traded price for a share of stock or any other security. The present price serves as the starting point in an open market. It shows the price that a buyer and seller would be prepared to accept for a subsequent transaction involving that security.

Calculating the cost of equity uses the following formula:

(DPS/MPS) + r DPS = Dividend per share

Market price per share is MPS, and dividend growth rate is r.

Equity cost = (2.71/39.88) +0.0345

Equity cost = 0.067 + 0.0345

Equity cost = 0.1015 10.1%

If the current share price is $39.88, the cost of equity for the corporation would be 10.1%.

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