Home Depot just paid a cash dividend of $7.60 per share. The dividends have grown at...

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Home Depot just paid a cash dividend of $7.60 per share. The dividends have grown at 11.8 percent per year recently. They are expected to grow at the same rate indefinitely.The current price of the stock is $284 per share. The risk-free rate is 3.5 percent, and the market risk premium is 6.0 percent. The stock beta is 0.96. a. Calculate the cost of equity using the Dividend Growth Model. b. Calculate the cost of equity using SLM. c. Explain, in your own judgment, what is the source of the major discrepancy between the estimates of (a) and (b)? Home Depot just paid a cash dividend of $7.60 per share. The dividends have grown at 11.8 percent per year recently. They are expected to grow at the same rate indefinitely.The current price of the stock is $284 per share. The risk-free rate is 3.5 percent, and the market risk premium is 6.0 percent. The stock beta is 0.96. a. Calculate the cost of equity using the Dividend Growth Model. b. Calculate the cost of equity using SLM. c. Explain, in your own judgment, what is the source of the major discrepancy between the estimates of (a) and (b)?

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a To calculate the cost of equity using the Dividend Growth Model also known as the Gordon Growth Mo... View the full answer