REVIEW AND SELF-TEST PROBLEMS12.1 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 at7 percent indefinitely. The stock currently sells for $25. What is Boone's cost ofequity capital? (See Problem 1.)

Risk-free rate = 8% = 0.08 Beta = 0.90 Market premium = 7% = 0.07 Required Rate of Return (RRR) =…

Answered: Boone's last dividend was $1.80 per…

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.)

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

Section: Chapter Questions

Problem 1PS

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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.)

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