1. In your weekly meeting Sue asks you to prepare some numbers for the investor conference call right after the board meeting. You know one question potential investors will have is how much return they can expect from investing in your common stock. So you need to calculate the cost of your stock in relation to the price and expected return.
2. The company’s common stock is currently selling for $50 per share. The current dividend is $2.00 per share. If dividends are expected to grow at 6 percent per year, the average market return is expected to be 6% for the next several years, your stock is of average volatility for the market, and inflation is expected to be 3% which is equal to the return on government bonds then what is the firm's cost of capital for common stock and expected return for investors?