Goliath Corp. just paid an annual dividend of $5.40 per share. The dividend growth rate is 5.5 percent, the tax rate is 21 percent, and the common stock sells for $58.50 per share. What is the cost of equity?

Goliath Corp. just paid an annual dividend of $5.40 per share. The dividend growth rate is 5.5 percent, the tax rate is 21 percent, and the common stock sells for $58.50 per share. What is the cost of equity?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 5P

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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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