Calculate the cost of equity using the constant growth DDM given the following: current dividend = $3;

Question:

Calculate the using the constant growth DDM given the following: current = $3; payout ratio = 0.5 (assume it is not changing); ROE = 12%; and the current market price of the stock = $24. Is the current management adding to or reducing the shareholders’ value?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...