ABC Inc. expects to earn $4 per share next year and will pay out all of its income as dividends. Current share price is $25. What is equity cost of capital? If it chooses to reduce its payout rate to 25% and reinvest the additional retained earnings in a new project that returns 11%. 

If the cost of equity does not change, what is the new share price?

Answer rating: 100% (QA)

AnswerThe equity cost of capital is the rate of return required by investors to hold a companys stoc... View the full answer