Easy Car Corp. is a grocery store located in the Southwest. It paid an annual dividend...

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Easy Car Corp. is a grocery store located in the Southwest. It paid an annual dividend of $6.00 last year to its shareholders and plans to increase the dividend annually at the rate of 2.0%. It currently has 5,000,000 common shares outstanding. The shares currently sell for $75 each. Easy Car's common stock has a beta of 1.2 The expected market return is 11% and the risk free rate is 4%. The corporate tax rate is 40%. What is the best estimate of the cost of equity to use in the computation of the WACC for Easy Car Corp.? Easy Car Corp. is a grocery store located in the Southwest. It paid an annual dividend of $6.00 last year to its shareholders and plans to increase the dividend annually at the rate of 2.0%. It currently has 5,000,000 common shares outstanding. The shares currently sell for $75 each. Easy Car's common stock has a beta of 1.2 The expected market return is 11% and the risk free rate is 4%. The corporate tax rate is 40%. What is the best estimate of the cost of equity to use in the computation of the WACC for Easy Car Corp.?

Answer rating: 100% (QA)

The cost of equity Re can be estimated using the Gordon Growth Model which is given by ... View the full answer