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15 March, 06:22

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $24.50 per share; its last dividend was $1.80; and it will pay a $1.89 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity

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  1. 15 March, 10:04
    0
    12.71%

    Explanation:

    The computation of the cost of common equity using the DCF approach is shown below:

    As we know that

    Cost of common equity = Current year dividend : Current price of the stock + growth rate

    = $1.89 : $24.50 + 0.05

    = 0.0771 + 0.05

    = 12.71%

    We simply applied the above formula so that the cost of common equity could arrive
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Home » Business » The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $24.50 per share; its last dividend was $1.80; and it will pay a $1.
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