CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

WTRS Inc.'s common stock is currently selling for $66.25 per share. You expect the next dividend to be $5.30 per share. If the firm has a dividend growth rate of 4%, what is its cost of equity?

A. 12.0%
B. 13.9%
C. 14.1%
Correct Answer: A

User Contributed Comments 11

User Comment
Arif99 =((5.30/66.25)+.04)*100
Indira 66.25=5.30/(k-0.04)=>12%
Nikita how are you getting 12% from the above 66.25 = 5.3/(k-0.04) = 0.04
merrick 5.3/66.25=.08
.08+.04=.12
johntan1979 By this question, you should get it right already (assuming you did the previous 9 questions).

Otherwise, lots of luck to you for the actual exam.
quanttrader if you can't get this, then sorry to say you're screwed!
jonan203 nikita, HP12c like this:

5.3 <enter><enter>
.04 <enter>
66.25 <times><plus>
66.25 <divide> = 12%
praj24 I'm screwed! Back to LOS... I'll be back!
praj24 ^^^ this fool needs to read the LOS next time!
Inaganti6 @johntan1979

You kept making superb comments all through most of the problems. Yet, the entire Equity section accounts for ~ 10% on the exam.

I got this question right but the lapse in your judgement is surprising and in some ways disappointing.
workinehg Assuming the stock is valued fairly? What if the stock is overvalued/undervalued. The formula is to calculate the intrinsic value and not market price.
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