Problem:
Angell Inc. hired you as a consultant to help them estimate their cost of capital. You have been provided with the following data: D0 =$1.20; P0 = $50.00; and g = 6% (constant).
Required:
Question: Based on the DCF approach, what is the cost of equity from retained earnings?
A. 8.07%
B. 8.26%
C. 8.41%
D. 8.54%
E. 8.70%
Note: Show supporting computations in good form.