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Hybrid Motors has paid increasing dividends of $.42, $.50, $.55, $.65, and $.80 a share over the past five years, respectively. The firm estimates that
Hybrid Motors has paid increasing dividends of $.42, $.50, $.55, $.65, and $.80 a share over the past five years, respectively. The firm estimates that future increases in its dividends will be comparable to the arithmetic average growth rate over these past five years. The stock is currently selling for $41.50 a share. The risk-free rate is 3.5 percent and the market risk premium is 8.6 percent. What is the cost of equity for Hybrid Motors if the firm's beta is 1.42?
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