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.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
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Chapter8: Analysis Of Risk And Return
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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.)
Transcribed Image Text: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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