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Office Stores just paid a cash dividend of $6.80 per share. The dividends are expected to grow at 5% per year indefinitely. The current price
Office Stores just paid a cash dividend of $6.80 per share. The dividends are expected to grow at
5% per year indefinitely. The current price of the stock is $210 per share.
The risk-free rate is 3.5 percent, and the market risk premium is 6.0 percent. The stock beta is
1.15.
a. Calculate the cost of equity using the Dividend Growth Model.
b. Calculate the cost of equity using SLM.
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