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Chapter 20
Chapter 17
Question 1
DVM no growth
KLF Co has paid a dividend of $0.25 per share for many years and expects to
continue paying out at this level for the foreseeable future. The company’s
current share price is $2.45.
Calculate the cost of equity using the dividend valuation model.
Ke = D/P 0
Ke = $0.25/$2.45 = 0.102 or 10.2%
502
