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    Question

    The cost of equity (Ke) using the Gordon Growth Model is

    calculated as:
    A (D1 / P0) + g Correct Answer Incorrect Answer
    B (D0 / P0) + g Correct Answer Incorrect Answer
    C (E1 / P0) + g Correct Answer Incorrect Answer
    D (D1 / (P0 - g)) Correct Answer Incorrect Answer
    E (EPS / P0) Correct Answer Incorrect Answer

    Solution

    The Gordon Growth Model (or Dividend Discount Model) states: Ke = (Expected Dividend per share next period / Current Market Price per share) + Constant Growth Rate of dividends = (D1 / P0) + g.

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