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What is the required rate of return

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Reference no: EM132824075

Question - Cost of Equity - Using Dividend Growth Model

1. ABC Industries will pay a dividend of $2 next year on their common stock. The company predicts that the dividend will increase by 5% each year indefinitely. What is the dividend yield if the stock is selling for $50 a share? What is the required rate of return?

2. The dividends are expected to grow at 7% per year in the future. ABC's common stock sells for $23 per share and its last dividend was $2. What is the cost of equity? What is the dividend yield?

Note: Cost of equity is same as the required rate of return on equity.

Reference no: EM132824075

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