Will Co Is Expected to Pay a Dividend of $2 Per

Multiple Choice

Will Co. is expected to pay a dividend of $2 per share at the end of year 1(Div₁) , and the dividends are expected to grow at a constant rate of 4 percent forever. If the current price of the stock is $20 per share, calculate the expected return or the cost of equity capital for the firm.

A) 10 percent
B) 4 percent
C) 14 percent
D) 20 percent