Question
Asked Feb 4, 2020
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NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year?

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Expert Answer

Step 1

Cost of equity:

The cost of equity is the minimum rate of return that an investor expects while contributing or investing in a firm's common share or equity shares.

Step 2

The formula as per Dividend-price approach:

Finance homework question answer, step 2, image 1

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