After that they plan to maintain a steady 5 increase in the


Suppose you have a company that is looking ahead to the future in terms of their equity positions. They plan to issue stock now, but not pay dividends for 5 years. At time 5, they predict they can pay a dividend of 2.25$. At that time, they feel they have the greatest potential to gain market share, so they plan to increase this dividend 10% for the next 4 years. After that, they plan to maintain a steady 5% increase in the dividend for the foreseeable future. The current stock price is 15.45$. What is the firms' cost of equity based upon this?

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Finance Basics: After that they plan to maintain a steady 5 increase in the
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