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COST OF COMMON EQUITY. A firm's common stock currently sells for $25 per share. The firm recently paid a dividend of $2.40 per share on

COST OF COMMON EQUITY. A firm's common stock currently sells for $25 per share. The firm recently paid a dividend of $2.40 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 3 percent per year. Calculate the firm's cost of retained earnings using the DCF approach.

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