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Sweet Treats common stock is currently priced at $17.15 a share. The company just paid $1.22 per share as its annual dividend. The dividends have been increasing by 2.4 percent annually and are expected to continue doing the same. What is this firm's cost of equity

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abiolataiwo2015

Answer:

9.68 percent

Explanation:

Calculation to determine the firm's cost of equity

Using this formula

Cost of equity=[(Annual dividend×Increase in dividends×/Current price of common stock]+Dividends

Let plug in the formula

Cost of equity=[($1.22 × 1.024)/$17.15] + 0.024

Cost of equity=($1.24928/$17.15)+0.024

Cost of equity=0.0728+0.024

Cost of equity=0.0968*100

Cost of equity=9.68 percent

Therefore the firm's cost of equity is 9.68 percent

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