Question
You pull up the following information on Cash Cow Inc. (CC) from Yahoo Finance. The forward dividend yield is 2.8%; the trailing dividend yield is
You pull up the following information on Cash Cow Inc. (CC) from Yahoo Finance. The forward dividend yield is 2.8%; the trailing dividend yield is 2%; the historical growth rate in dividends is 6% and the future expected growth rate is 5% per year. What is the cost of equity based on the Dividend Discount Model (DDM), assuming that the stock price of CC is equal to its fundamental value.
A. | The cost of equity is 8.0%. | |
B. | The cost of equity is 8.8%. | |
C. | The cost of equity is 7.8%. | |
D. | The cost of equity is 2.1%. | |
E. | The cost of equity is 2.9%. | |
F. | The cost of equity is 7.0%. |
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