QUESTION 14

- An investor is analyzing a stock using the constant growth dividend discount model. The equity currently trades at $10 and is expected to pay a dividend of $2. The investors required rate of return is 8%. Compute the implied growth rate:
- A. 2%
- B. 4%
- C. 6%
- D. 8%

**4.00000 points **

- The same investor in the prior question is again reviewing a stock using the constant growth dividend discount model. The equity currently trades at $100 and pays a dividend of $30. The perpetual growth rate is assumed to be 5%. Compute the investors cost of equity:
- A. 2%
- B. 4%
- C. 6%
- D. 8%