Write a user-defined function to calculate the required return on common stocks (kCS) using the H-Model as defined by (9-8) on page 264. The formula is:
1. The function should be named HModelCostEquity, and will need to accept six arguments: the initial growth rate (g1), the period of time that dividends will grow at this initial rate (n), the dividend growth rate for the remainder of time (g2), the length of the transition phase (T), the last dividend payment (D0), and the price of the share of stock today (VCS).
2. Use the function to find the solution given the following data: the last dividend payment is $0.80; the initial growth rate is 6% during the first three years. This growth rate will decline to 3% and will become constant in year 6 (T = 3 years). The price of the stock is $12.75.
Public Function HModelCostEquity(Div0 As Single, Growth1 As Single, Growth2 As Single, Growth1Time As Single, TransitionTime As Single, CurrentPrice As Single) as Single
'Problem 1 code to calculate the cost of equity using the H-Model
HModelCostEquity = Div0 / CurrentPrice * ((1 + Growth2) + (Growth1Time + TransitionTime / 2) * (Growth1 - Growth2)) + Growth2
End Function
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