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Question
Will Co. is expected to pay a dividend of $2 per share at the end of year -1(D1) and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $20 per share calculate the expected return or the cost of equity capital for the firm.
A. 10%
B. 4%
C. 14%
D. None of the above.
Answer
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Related questions
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Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate).
A. $5.00
B. $2.14
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B. Fall exactly by the amount of the dividend
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One key assumption of the Miller and Modigliani (MM) dividend irrelevance argument is that:
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