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CFA Level 1
Corporate Finance

Estimating Cost of Equity with Gordon Growth Model

Medium Cost Of Capital Cost Of Equity

You are analyzing the cost of equity for a public company that is expected to have stable growth in its earnings. The company currently pays a dividend of $2.00 per share, and it is anticipated that dividends will grow at a constant rate of 5% per year indefinitely. Based on the Gordon Growth Model, what is the estimated cost of equity for this company?

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