Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Growth rate in stock dividends and the cost of equity In March of this past year Mancheste...

Growth rate in stock dividends and the cost of equity In March of this past year Manchester Electric an electrical supply company operating throughout the southeastern United States and a publicly

Growth rate in stock dividends and the cost of equity) In March of this past year, Manchester Electric (an electrical supply company operating throughout the southeastern United States and a publicly held company) was evaluating the cost of equity capital for the firm. The firm’s shares are selling for $45.00; it expects to pay an annual cash dividend of $4.50 a share next year, and the firm’s investors anticipate an annual rate of return of 18 percent.

a. If the firm is expected to provide a constant annual rate of growth in dividends, what rate of growth must the firm experience?

b. If the risk-free rate of interest is 3 percent and the market risk premium is 6 percent, what must the firm’s beta be to warrant an 18 percent expected rate of return on the firm’s stock?

Apr 27 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions