11-7: Dividend-Yield-Plus-Growth-Rate, or Discounted Cash Flow (DCF), Approach Problem Walk-Through

Problem 11-5 Cost of Equity: DCF

Summerdahl Resorts' common stock is currently trading at $35.00 per share. The stock is expected to pay a dividend of $2.75 a share at the end of the year (D₁ = $2.75), and the dividend is expected to grow at a constant rate of 8% a year. What is its cost of common equity? Round your answer to two decimal places.

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