You are considering the purchase of stock XYZ. XYZ pays a dividend of $1.00 and expects to grow dividends by 6.0% each year. A stock of similar risk, ABC, currently trades at $55.79, pays a dividend of $3.25 per share, and expects to grow dividends by 3.0% each year.
Fair Market Price of stock XYZ is $35.33
Cost of capital has been calculated from the given data of ABC stock
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