Chelsea Fashions recently paid an annual dividend of $1.20 per share. The estimated dividend growth rate is 6.94%. The current market price of the stock is $21.80. What is the firm's cost of equity? 12.83% 13.44% 13.88% 12.44% O 14.94%

Chelsea Fashions recently paid an annual dividend of $1.20 per share. The estimated dividend growth rate is 6.94%. The current market price of the stock is $21.80. What is the firm's cost of equity? 12.83% 13.44% 13.88% 12.44% O 14.94%

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

Chelsea Fashions recently paid an annual dividend of
$1.20 per share. The estimated dividend growth rate is
6.94%. The current market price of the stock is $21.80.
What is the firm's cost of equity?
12.83%
O 13.44%
13.88%
O 12.44%
O 14.94%

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