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The cost of equity: The Dedus Shoes, Inc., has common shares with a price of $28.76 per share. The firm paid a dividend of $1.00
The cost of equity: The Dedus Shoes, Inc., has common shares with a price of $28.76 per share. The firm paid a dividend of $1.00 yesterday, and dividends are expected to grow at 10 percent for two years and then at 5 percent thereafter. What is the implied cost of common equity capital for Dedus?
28.76 = (1.1^2)/(1+r) + (1.1^3)/(1+r)^2 + (1.1^3 * 1.05)/(r-0.05)*(1+r)^3
I understand that you would use that formula.. But i dont get any part of the formula or how to solve it
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