Calculate a firms cost of equity

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Reference no: EM13939812

Consider one of the two equations that can be used to calculate a firm's cost of equity: rE=Div1/P0+g. If the expected growth rate of American Airlines common stock dividends increases and if the price of AAL's stock also increases, what happens to AAL's cost of equity? It_______.

A: increases

B: decreases

C: remains unaffected

D: might go up or down, depending on the relative sizes of the two changes.

Reference no: EM13939812

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