19. Calculating the Cost of Equity Floyd Industries stock has a beta of 1.15. The company just paid a dividend of $.75 and the dividendsare expected to grow at 4.5 percent per year. The expected return on the market is 11 percent and Treasury bills are yielding 3.7 percent.The most recent stock price for the company is $84.a. Calculate the cost of equity using the DDM method.b. Calculate the cost of equity using the SML method.c. Why do you think your estimates in (a) and (b) are so different?

Cost of equity refers to the return that is actually received by the company’s shareholders for…

Answered: 19. Calculating the Cost of Equity…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 10P

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