Question
FF Health is a large for-profit home health agency. Its dividends are expected to grow at a constant rate of 3% per year, forever. The
FF Health is a large for-profit home health agency. Its dividends are expected to grow at a constant rate of 3% per year, forever. The firm's just paid a dividend of $2.25 per share. The stock price is $45 per share. The firm's beta is 0.9; the risk-free rate is 2%, and the expected rate of return on the market is 8%. The firm's target capital structure calls for 40% debt financing, the interest rate required on its new debt is 4%, and the firm's tax rate is 30%. Calculate the cost of capital using the DDM for Ke. (Enter percentages as decimals and round to 4 decimals)
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