Sutter Corporation's common stock is selling for $16.80 a share. Last year Sutter paid a dividend of $.80
Investors are expecting Sutter's dividends to grow at an annual rate of 5% per year. What is the cost of internal
equity?
What will be an ideal response?
D1 = $.80 × 1.05 = $.84
Cost of internal equity = $.84/$16.80 + .05 = 10%
Business
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