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MIT, Inc. has paid annual dividends of $0.60, $0.65, $0.70, and $0.75 per share over the...

MIT, Inc. has paid annual dividends of $0.60, $0.65, $0.70, and $0.75 per share over the last four years, respectively. The stock is currently selling for $24 a share. What is this firm's cost of equity?

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Answer #1
Cost of equity ( r) D1÷P0+g
Here,
Net stock price (P0) $                     24.00
Expected dividend (D1) $                       0.81 =0.75*(1+7.72%)
Growth rate (g) 7.72% =(0.75/0.6)^(1/3)-1
Cost of equity ( r) 11.09%
0.81÷24+7.72%
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