[estricklen]

What is the cost of equity and what is the formula

2.40 per share on common stock, 5.5% growth rate, stock sells for 52.00

[ArcSine]

Stock for which the dividends are expected to grow indefinitely at a constant rate g is usually priced using



with playing the respective roles of today's stock price; next year's dividend; and the appropriate discount rate.

First you need to determine from the background material if that dividend is today's, or next year's (these questions always seem to assume annual divvy payouts, so I'll assume likewise). If it's today's dividend, you'll need to use the expected growth rate to come up with the numerator of the formula.

You've got three of the four variables; now just solve for r.

[estricklen]

Thank you,

You've made it better for me to understand. We have been moving so fast until not just me but others are getting confused.

:)

E.