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    Cost of equity for Lester's Electronics

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    Last week, Lester's Electronics paid an annual dividend of $2.75 on its common stock. The company has a longstanding policy of increasing its dividend by 3 percent annually. This policy is expected to continue. What is the firm's cost of equity if the stock is currently selling for $42.5 a share?

    1. 9.66 percent
    2. 7.77 percent
    3. 8.80 percent
    4. 7.22 percent
    5. 9.91 percent.

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