EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 12, Problem 5P
Summary Introduction

To determine: The cost of internal equity.

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The stock of Alpha Tool sells for $18.30 per share. Its current dividend rate, D0, is $2 per share. Analysts and investors expect Alpha to increase its dividends at a 10 percent rate for each of the next 2 years. This annual dividend growth rate is expected to decline to 6 percent for years 3 and 4 and then to settle down to 4 percent per year forever. Calculate the cost of internal equity for Alpha Tool. Use Table II for your calculations. Round your answer to the nearest whole number.   %
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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY