What would you estimate to be the required rate of return for equity investors (i.e., cost of equity) if a stock sells for $40 and will pay a $4.40 dividend that is expected to grow at a constant rate of 5%?

A) 7.6%
B) 12.0%
C) 12.6%
D) 16.0%

Ans: D) 16.0%

Business

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