our company’s stock sells for $50 per share, its last dividend (D0) was $3.00, its growth rate is a constant 11 percent. What is the firm’s cost of equity, rs? (Ignoring Flotation cost) 9.83% 13.58% 17.66% 6.66% 11.29%

our company’s stock sells for $50 per share, its last dividend (D0) was $3.00, its growth rate is a constant 11 percent. What is the firm’s cost of equity, rs? (Ignoring Flotation cost) 9.83% 13.58% 17.66% 6.66% 11.29%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 13P: The Cost of Equity and Flotation Costs Messman Manufacturing will issue common stock to the public...

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Question

Your company’s stock sells for $50 per share, its last dividend (D₀) was $3.00, its growth rate is a constant 11 percent. What is the firm’s cost of equity, r_s? (Ignoring Flotation cost)

9.83%

13.58%

17.66%

6.66%

11.29%

Definition Definition Amount of return a company generally pays to its equity investors. The cost of equity represents the compensation required by the market in lieu of owning the asset firm and simultaneously bearing the risk of ownership.

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