SodaFizz paid a dividend of $2 per share last year; its dividend has been growing at a
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SodaFizz paid a dividend of $2 per share last year; its dividend has been growing at a rate of 2% per year, and that growth rate is expected to continue into the future. The stock of SodaFizz is currently trading at $19.50 per share. According to the constant dividend growth model, what is the cost of equity capital for SodaFizz?
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As per constant dividend growth model wh...View the full answer
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This model assumes that the required rate of return will remain the same for the foreseeable future and also assumes that the growth rate is going to be constant. The same results will be obtained using the sustainable growth rate formula that states g = b x ROI
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