Answer:
Cost of equity = 11.87%
Explanation:
Cost of equity is defined as the amount that a business pays to its equity investors or shareholders as compensation for the risk of finding the business.
Usually businesses may not have enough capital to run their operations properly in meeting organisational goals. So they seek for funding from investors, and these investors are compensated for giving the business capital.
The formula for cost of equity is
Cost of equity={ (Dividend * Growth rate) ÷ Current stock price} + percentage increase in dividend)
Cost of equity={ (3.31 * 1.0375) ÷ 42.28} + 0.0375)
Cost of equity= (3.434 ÷ 42.28) + 0.0375 = 0.1187
Cost of equity = 11.87%
Answer:
11.87%
Explanation:
Calculation for Judy's Boutique company's cost of equity if the current stock price is $42.28 per share
Using this formula
RE=[(Annual dividend×dividend Increase percentage)/current stock price]+dividend increase percentage
Let plug in the formula
RE = [($3.31× 1+.0375) / $42.28] + .0375
RE=[($3.31×1.0375)/$42.28]+.0375
RE=($3.434125/$42.28)+.0375
RE=0.0812233+.0375
RE=0.1187×100
RE=11.87%
Therefore the company's cost of equity if the current stock price is $42.28 per share would be 11.87%
