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Problem:

Stock in Dragula Industries has a beta of 1.2. The market risk premium is 6 percent, and T-bills are currently yielding 5.30 percent. The company's most recent dividend was $1.70 per share, and dividends are expected to grow at a 5.0 percent annual rate indefinitely.

Required:

If the stock sells for $35 per share, what is your best estimate of the company's cost of equity?

Note: Explain all steps comprehensively.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166033

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