Miron’s Copper Corp. management expects its common stock dividends to grow 1.5 per cent per year for the indefinite future. The firm’s shares are currently selling for $18.45, and the firm just paid a dividend of $3.00 yesterday. What is the cost of comm

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01.08.2022 - 09:14

Miron’s Copper Corp. management expects its common stock dividends to grow 1.5 per cent per year for the indefinite future. The firm’s shares are currently selling for $18.45, and the firm just paid a dividend of $3.00 yesterday. What is the cost of comm

Question:

Miron’s Copper Corp. management expects its common stock dividends to grow 1.5 per cent per year for the indefinite future. The firm’s shares are currently selling for $18.45, and the firm just paid a dividend of $3.00 yesterday.

What is the cost of common stock for this firm?

Answers (1)

Zola April 12, 2023 в 01:52

The cost of common stock for Miron's Copper Corp. can be calculated using the constant growth dividend discount model as follows: Cost of Common Stock = (Dividend / Current Stock Price) + Expected Annual Growth Dividend = $3.00 (given) Current Stock Price = $18.45 (given) Expected Annual Growth = 1.5% Cost of Common Stock = ($3.00 / $18.45) + 0.015 = 0.1621 or 16.21% Therefore, the cost of common stock for Miron's Copper Corp. is 16.21%. This means that the company must generate a return of at least 16.21% on its investments in order to satisfy its shareholders and justify their investment in the company.

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