Answer:
15.63%
Explanation:
Calculation to determine cost of equity
Using this formula
P = D/(r-g)
Where,
P=40
D=4.25
g=0.05
r=?
Let plug in the formula
Cost of equity=40 = 4.25/(r-0.05)
Cost of equity=r = (4.25/40)+0.05
Cost of equity=r =0.1063+0.05
Cost of equity=r =0.1563*100
Cost of equity = 15.63%
Therefore cost of equity is 15.63%
