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Prepare two estimates of Pearson’s cost of common equity using the dividend growth model where you use growth rates in dividends that are 25% lower than the estimated 6.25% and growth rates in dividends that are 25% greater than the estimated 6.25%. The current dividend is R0.49 per share and the price of common stock is R19.39.

Prepare two estimates of Pearson’s cost of common equity using the dividend growth model where you use growth rates in dividends that are 25% lower than the estimated 6.25% and growth rates in dividends that are 25% greater than the estimated 6.25%. The current dividend is R0.49 per share and the price of common stock is R19.39.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 2P
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Prepare two estimates of Pearson’s cost of common equity using the dividend growth model where you 
use growth rates in dividends that are 25% lower than the estimated 6.25% and growth rates in dividends 
that are 25% greater than the estimated 6.25%. The current dividend is R0.49 per share and the price of 
common stock is R19.39. 

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