Howard, LLC has an equity beta of 1.3. The company just paid an annual dividend of $0.30, and the dividends are expected to grow at 4 percent per year. The expected return on the market is 13%. The most recent stock price was $80. Calculate the cost of equity using the Dividend Discount Method.

Howard, LLC has an equity beta of 1.3. The company just paid an annual dividend of $0.30, and the dividends are expected to grow at 4 percent per year. The expected return on the market is 13%. The most recent stock price was $80. Calculate the cost of equity using the Dividend Discount Method.

Name: Howard, LLC has an equity beta of 1.3. The company just paid an annua
Uploaded: 2024-03-20T06:51:32.000Z
Channel: Bartleby
Description: Howard, LLC has an equity beta of 1.3. The company just paid an annual dividend of $0.30, and the dividends are expected to grow at 4 percent per year. The expected return on the market is 13%. The most recent stock price was $80. Calculate the cos

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter9: The Cost Of Capital

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

Dubai Industries stock has a beta of 1.50. The company just paid a dividend of $.80, and the dividends are expected to grow at 5 percent per year. The expected return on the market is 12 percent, and Treasury bills are yielding 5.5 percent. The most recent stock price for Dubai Industries is $61. Required: Calculate the cost of equity using the DDM method (dividend discount model). Calculate the cost of equity using the SML method (security market line). Why do you think your estimates in (1) and (2) are so different?
Aboudy Corporation's stock price is currently $22.00 per share. The company has just paid a dividend of $0.55 per share, and shareholders anticipate that this dividend will grow in the future at a rate of 6% per year. Use the Gordon model to calculate the company's cost of equity rE.
Floyd Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent per year. The expected return on the market is 12 percent, and Treasury bills are yielding 6.4 percent. The current price of the company's stock is $81. a. Calculate the cost of equity using the DDM method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DDM method % b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method %
National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 a share. The dividend growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of equity using the CAPM? What is the estimated cost of equity using the dividend discount model? Re_CAPM Re_DGM de % % do
NoRagrets, Inc is expected to pay a dividend in year 1 of $2 and a dividend in year 2 of $2.40. After year 2, dividends are expected to grow at the rate of 6% per year. An appropriate required return for the stock is 9%. The stock should be worth _______ today. Select one: a. $79.63 b. $73.21 c. $67.32 d. $73.37
The stock price of Fujita Company is $62. Investors require a return of 10.1 percent on similar stocks. If the company plans to pay a dividend of $4.05 next year, what growth rate is expected for the company's stock price? Can someone explain how to do this with a financial calculator?
Slow 'n Steady, Inc., has a stock price of $35, will pay a dividend next year of $3.20, and has expected dividend growth of 1.7% per year. What is your estimate of Slow 'n Steady's cost of equity capital? The required return (cost of capital) of levered equity is %. (Round to one decimal place.) ...
Ginger Industries stock has a beta of 1.33. The company just paid a dividend of $.83, and the dividends are expected to grow at 5.3 percent. The expected return on the market is 11.8 percent, and Treasury bills are yielding 5.3 percent. The most recent stock price is $83.00. Calculate the cost of equity using the dividend growth model method. Calculate the cost of equity using the SML method.
Last year Artworks, Inc. paid a dividend of $1.75. You anticipate that the company’s growth rate is 6 percent and have a required rate of return of 9 percent for this type of equity investment. What is the maximum price you would be willing to pay for the stock? Could you answer in an equation form so i can see where the numbers are supposed to be plugged in
Largan Co has a preterted stock outstanding with a par value of $100 and its dividend is $1 per quarter. The current stock price is $120. 1A.What is its nominal required rate of return per annual? 1B. What is the effective rate of return? show solution
ABC Company is expected to pay $2.80 per share dividend at the end of the year (D1 = $2.80). The dividend is expected to grow at a constant rate of 5% per year. The required rate of return on the stock, rs is 9%. What is the stock’s current value per share? 2. Use the information from question 2 to calculate the following. You will need to also calculate the current stock price for year 2 in order to calculate each of these items. (hint: Use PowerPoint slide 14 as a guide): Dividend yield Capital gains yield Total return 3. ABC Company also has perpetual preferred stock outstanding that sells for $25 a share and pays a dividend of $3.00 at the end of each year. What is the required rate of return?
HighGrowth Company has a stock price of $20. The firm will pay a dividend next year of $1.03, and its dividend is expected to grow at a rate of 3.6% per year thereafter. What is your estimate of HighGrowth's cost of equity capital? The required return (cost of capital) of levered equity is __ % ? (Round to one decimal place.)