Cullumber inc.’s common shares currently sell for $42 each. the firm’s management believes that its shares should really sell for $60 each. the firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 5 percent per year forever (and this is common knowledge to the market).

what is the current cost of common equity for the firm? what is the appropiate cost of equity (as per firm belief)

8.5%

Explanation:

Data provided in the question:

Current market price = $42 each

Firm's price = $60

Annual dividend paid = $2 per share

Growth rate = 5%

Now,

Cost of Common Equity

= [ Dividend Next Year ÷ Current Price ] + Dividend Growth Rate

and,

Dividend Next Year = $2 × (1 + 0.05) = $2.1

Therefore,

The current cost of common equity for the firm

= [ Dividend Next Year ÷ Market Price ] + Dividend Growth Rate

= [ $2.1 ÷ $42 ] + 0.05

= 0.1  

or

= 0.1 × 100% = 10%

The appropiate cost of equity (as per firm belief)

= [ Dividend Next Year ÷ Firm's believed Price ] + Dividend Growth Rate

= [ $2.1 ÷ $60 ] + 0.05

= 0.085

or

= 0.085 × 100%

= 8.5%

the answer is b. the events might happen and are based on crimes.

anyone below or above ambitious can tell you. so crowns mean brainliest. getting brainliest means your answer needs a good explanation and the person asking the question can understand your answer easily. so say there's a multiple choice question. you don't just want to say your answer is a, hope it . provide evidence and reasoning so that they know that that is the correct answer. a good explanation should have evidence, good reasoning, and your opinion on why you picked that. you don't want to look up their question on the internet and see if you can answer it. pick questions that you 100% know the answer to, so than that way you can provide a better explanation.

best of luck,

the divergent