The stock of Alpha Tool sells for $10.25 per share. Its current dividend
rate, D0, is $1 per share. Analysts and investors expect Alpha to
increase its dividends at a 10 percent rate for each of the next 2
years. This annual dividend growth rate is expected to decline to 8
percent for years 3 and 4 and then to settle down to 4 percent per year
forever. Calculate the cost of internal equity for Alpha Tool.
Click here for the solution: The stock of Alpha Tool sells for $10.25 per share
