Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.3, the risk-free rate is 5.3%, and the market risk premium is estimated to be 5.1%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.) b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? The expected growth rate for dividends is %. (Round to two decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.3, the risk-free rate
is 5.3%, and the market risk premium is estimated to be 5.1%.
a. Estimate the equity cost of capital for Mackenzie.
b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of
capital as in part (a)?
a. Estimate the equity cost of capital for Mackenzie.
The equity cost of capital for Mackenzie is %. (Round to two decimal places.)
b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of
capital as in part (a)?
The expected growth rate for dividends is
%. (Round to two decimal places.)
Transcribed Image Text:Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.3, the risk-free rate is 5.3%, and the market risk premium is estimated to be 5.1%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.) b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? The expected growth rate for dividends is %. (Round to two decimal places.)
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