Nikulbhai Problem 14-23 Calculating the Cost of Equity [LO1]Ginger Industries stock has a beta of 1.30. The company just paid a dividend of $.30, andthe dividends are expected to grow at 4 percent. The expected return on the market is13 percent, and Treasury bills are yielding 5.1 percent. The most recent stock price for thecompany is $68.a. Calculate the cost of equity using the DGM method. (Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)b. Calculate the cost of equity using the SML method. (Do not round intermediatecalculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.)a. DGM methodb. SML method%%

Step 1: The calculation of the cost of equity using DCF and SML methods AB1Beta1.32Dividend paid…

Answered: Problem 14-23 Calculating the Cost of…

Fundamentals of Financial Management (MindTap Course List)

15th Edition

ISBN:9781337395250

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 22SP

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REVIEW AND SELF-TEST PROBLEMS 12.1 Calculating the Cost of Equity Suppose stock in Boone Corporation has a beta of .90. The market risk premium is 7 percent, and the risk-free rate is 8 percent. Boone's last dividend was $1.80 per share, and the dividend is expected to grow at 7 percent indefinitely. The stock currently sells for $25. What is Boone's cost of equity capital? (See Problem 1.)
Problem 13-1 Calculating Cost of Equity The Swanson Corporation's common stock has a beta of 1.5. If the risk-free rate is 5.5 percent and the expected return on the market is 13 percent, what is the company's cost of equity capital? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cost of equity capital %
Question 13 Burke Tires just paid a dividend of Do-$1.3. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 4% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock's current market value?
Question 14 Wisteria Co. has a beat of 1.6. If the risk-free rate is 4% and the market return is 12%, what is its cost of equity assume CAPM? 17.2% 18.5% O 15.8% O 16.8% Question 15 The preferred stock of Sunflower Co. pays an annual dividend of $5.25 a share and sells for $70 a share. What is the firm's cost of preferred stock? O 7.50 percent O 8.00 percent O 5.24 percent O 6.48 percent
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QUESTION 1 Stock in CDB Industries has a beta of 1.12. The market risk premium is 7.2 fercent, and T-bills are currently yielding 4.2 percent. CDB's most recent dividend was $3.60 per share, and dividends are expected to grow at a 5.2 percent annual rate indefinitely. Required: If the stock sells for $58 per share, what is your best estimate of CDB's cost of equity? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).) cost of equity: %
Q36 A stock that just gave a dividend of OMR 1.545 and long-term annual growth rate of the company is 3%. If the Investors required rate of return (Ke) of 8% from such stock, then how much is the market price of the stock? a. OMR18.75 b. OMR 31.827 c. OMR 30.9 d. OMR 30
QUESTION 17 Find the intrinsic value of the stock that pays a dividend of $4.12 and has a growth rate of 11.5% for 4 years then it stabilizes at a long-run growth rate of 2.4%. The stock has a Beta of 1.12, the risk free rate is 4.0% and the market return is 6.12%. A. $75.68 B. $87.92 C. $122.11 D. $146.70
Problem 9.16 The preferred stock of Axim Corp. is currently selling at $48.95. If the required rate of return is 11.6 percent, what is the dividend paid by this stock? (Round answer to 2 decimal places, e.g. 15.25.) Dividend paid
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Question 25 Goode Inc.'s stock has a required rate of return of 14.2%, and it sells for $65 per share. Goode's dividend is expected to grow at a constant rate of 3.3%. What is the next expected dividend, D1? O $6.09 $5.59 A O $7.09 O $6.59 O $7.59

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