A new common stock issue that paid a $1.83 dividend last year. The firm's dividends are expected to grow 6.9% per year forever. The price of the firm's common stock is now $27.51.

The cost of capitol from the common equity is ____%

What did you come up with?

Show your work, and your answer, and we'll go from there.

Quote:

---

Originally Posted by Alty

What did you come up with?

Show your work, and your answer, and we'll go from there.

---

I don't even know how to begin to get the answer. It has to be in percent, but I'm lost. I've tried all different ways, but the answer is 6.00%

Quote:

---

Originally Posted by annie1409

I don't even know how to begin to get the answer. It has to be in percent, but I'm lost. I've tried all different ways, but the answer is 6.00%

---

That's odd. How did you get the answer if you have no idea how to get the answer?

Quote:

---

Originally Posted by annie1409

I don't even know how to begin to get the answer. It has to be in percent, but I'm lost. I've tried all different ways, but the answer is 6.00%

---

AMHD doesn't do homework - I've told you that before.

You've posted 3 questions. Open your textbook.

Quote:

---

Originally Posted by Alty

That's odd. How did you get the answer if you have no idea how to get the answer?

---

I gave the wrong answer. The answer is 14.01%. I put numbers in the study help an it gave me answers.

Quote:

---

Originally Posted by JudyKayTee

AMHD doesn't do homework - I've told you that before.

You've posted 3 questions. Open your textbook.

---

Thank you so much... but I don't have a textbook.

Quote:

---

Originally Posted by annie1409

Thank you so much....but I don't have a textbook.

---

We really can't help unless you make the effort.

Even if your work is wrong, show us the work you've done, what you've tried, and the answer you got.

We can correct your work. We can't do the work for you. In other words, we can't give you the answer. You won't learn that way, and that's why we don't do homework. We won't be at your side when you take the test.

Put in some effort. Show your work, right or wrong, and we'll go from there.

Where are your parents? You are asking for help on the Internet rather than ask your parents for help?

OK, Annie, textbook or no, you do have internet access, which you'll use to look here.

Your question wants you to use the Gordon model to determine the cost of capital, which is r in the formula.

Your problem furnishes the current share price and the growth rate g. It also gives you next year's expected dividend , but not directly. It gives you this year's dividend, to which you'll apply the growth rate to come up with the next year's dividend which the model requires.

Then by knowing the current share price , the growth rate g, and , you can rearrange Gordon to solve for the cost of capital r.

You can take it from here.