Cost of common equity the current share price of victoria, Finance Basics

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Cost of common equity the current share price of victoria

Question: (Cost of common equity) The current share price of Victoria Plc. is $49. The company has just paid a dividend of $2.5 per share. Dividends are expected to rise by 5 percent per year indefinitely. The company is in a higher systematic risk class than the average share.

a. Calculate the intrinsic value of one share of Victoria Plc. if the required rate of return is 15 percent.

b. What is the cost of equity capital of Victoria Plc.?

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