Answer:
8.5%
Explanation:
Company ABC just paid an annual dividend of $3.55
The firm increases its dividend by 3.55 percent annually
The current stock price is $43.24
Therefore the company cost of equity can be calculated as follows
= 3.55 × (1+3.55/100)/43.24+3.55/100
= 3.55 × 1+0.0355/43.24+0.0355
= 3.55 × 1.0355/43.2755
= 3.6760/43.2755
= 0.085× 100
= 8.5%
Hence the company cost of equity is 8.5%
