Ossdale co. stock currently sells for $72.65 per share and has a beta of 1.21. the market risk premium is 7.20 percent and the risk-free rate is 2.94 percent annually. the company just paid a dividend of $4.25 per share, which it has pledged to increase at an annual rate of 3.55 percent indefinitely. what is your best estimate of the company's cost of equity?

10.63%

Explanation:

(1) Current share price = $72.65

current dividend = $4.25

Growth rate = 3.55%

Cost of equity:

= {[Current dividend (1 + Growth rate)] ÷ Price} + Growth rate

= {[$4.25(1 + 3.55%)] ÷ $72.65} + 3.55%

= 9.607639%

(2) Risk free rate = 2.94%

Market risk premium = 7.20%

Beta = 1.21

Cost of equity:

= Risk free rate + (Beta × Market risk premium)

= 2.94% + (1.21 × 7.20%)

= 11.65200%

Average cost of equity = (9.607639% + 11.65200%) ÷ 2

                                      = 10.62982%

Therefore, the best estimate of the company's cost of equity is 10.63%.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

answer; im thinking the correct answer is (7years);