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ABC Corp. has a stock price P 0 = 50. The firm has just paid a dividend of $3 per share, and intelligent shareholders think

ABC Corp. has a stock price P 0 = 50. The firm has just paid a dividend of $3 per share, and intelligent shareholders think that this dividend will grow by a rate of 5% per year. Use the Gordon dividend model to calculate the cost of equity of ABC.

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