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Problem:

Stock in Dragula Industries has a beta of 1.3. The market risk premium is 6 percent, and T-bills are currently yielding 4.30 percent. The company's most recent dividend was $1.50 per share, and dividends are expected to grow at a 8.0 percent annual rate indefinitely.

Required:

Question: If the stock sells for $45 per share, what is your best estimate of the company's cost of equity?

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167413

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