Problem 13-19 Calculating the Cost of Equity Ginger Industries stock has a beta of 1.20. The company just paid a dividend of $.50 and the dividends are expected to grow at 6 percent per year. The expected return on the market is 11 percent, and Treasury bills are yielding 6.5 percent. The most recent stock price for the company is $82. a. Calculate the cost of equity using the DDM. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the CAPM. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. DDM b. CAPM % % < Prev 5 of 11 Next >

Problem 13-19 Calculating the Cost of Equity Ginger Industries stock has a beta of 1.20. The company just paid a dividend of $.50 and the dividends are expected to grow at 6 percent per year. The expected return on the market is 11 percent, and Treasury bills are yielding 6.5 percent. The most recent stock price for the company is $82. a. Calculate the cost of equity using the DDM. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the cost of equity using the CAPM. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. DDM b. CAPM % % < Prev 5 of 11 Next >

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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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 dividends are 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?
Suppose Barclay Corp is expected to pay a dividend of $2.50 at the end of the year. f the company and its dividends are growing at a relatively constant rate of 3.5% and Investors required return on the stock is 10.2%, what is the value of the stock? O$37.31 O $24.47 O$25.37 O $24.51 O$38.62 Page 13 of 30 Previous Page Next Page 0gf30.guestions.saved.
Problem 1. Ferry Motors' common stock just paid its annual dividend of $1.80 per share. The required return on the common stock is 12%. Estimate the value of the common stock under each of the following assumptions about the dividend: a. Dividends are expected to grow at annual rate of 0% to infinity. b. Dividends are expected to grow at a constant annual rate of 5% to infinity. C. Dividends are expected to grow at an annual rate of 5% for each of the next 3 years, followed by a constant annual growth rate of 4% in years 4 to infinity.
Problem 1: Nachman Industries just paid a dividend of Do = $1.32. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% 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?
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Dubai Metro's outstanding common stock is currently selling in the market for $33. Dividends of $2.30 per share were paid last year, return on equity is 20%, and its retention rate is 25%. What is the value of the stock to you, given a 15% required rate of return? a. $ 24.15 b. $ 20.15 c. $ 24.30 d. $ 35.30
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