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Find the cost of its equity according to gordon dividend

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Question 1: A firm`s present market price of the share is Rs 40 and its EPS is Rs 12. The firm is planning to declare 45% of this as dividends. If the firm reinvests its retained earnings at the rate of 14%, the cost of its equity according to Gordon dividend capitalization model is:

a) 20%

b) 21.20%

c) 22%

d) 26.20%

Reference no: EM132586640

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