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15 April, 07:03

Gremlin Industries will pay a dividend of $ 1.70 per share this year. It is expected that this dividend will grow by 7 % per year each year in the future. The current price of Gremlin's stock is $ 22.50 per share. What is Gremlin's equity cost of capital?

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  1. 15 April, 07:14
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    Gremlin's equity cost of capital is 14.56%

    Explanation:

    Gremlin's equity cost of capital = (D1 / P0) + g

    = ($1.70/$22.50) + 0.07

    = 0.1456 or 14.56%

    Therefore, Gremlin's equity cost of capital is 14.56%
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