Answered: The cost of the firm's common stock…

Business

Finance

The cost of the firm's common stock equity is Select one:

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

A firm has common stock with a market price of $45 per share and an expected dividend of $3 per share at the end of the coming year. The growth rate in dividends has been 4%. The cost of the firm's common stock equity is

Select one:

9.75%

10.67%

11.25%

8.42%

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