75. An analyst gathers the following information about a company and the market:
Current market price per share of common stock €32.00
Most recent dividend per share paid on common stock €2.40
Expected dividend payout rate 40%
Expected return on equity (ROE) 15%
Beta for the common stock 1.5
Expected return on the market portfolio 12%
Risk-free rate of return 4%
Using the dividend discount model approach, the cost of common equity for the
company is closest to:
A. 16.0%.
B. 16.5%.
C. 17.2%.
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