Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 2% forever. Its stock price is $38.7 and its beta is 1.7. The risk-free rate is 2% and the expected return on the market portfolio is 8%.   What is the best guess for the cost of equity? Recall that both Dividend Growth Model and CAPM can be used to find cost of equity. Here assume the best guess is the simple average of the two.

You need to estimate the equity cost of capital for XYZ Corp. You have the following data available regarding past returns: a. What was XYZ's average historical return? b. Compute the market's and XYZ's excess returns for each year. Estimate XYZ's beta. c. Estimate XYZ's historical alpha. d. Suppose the current risk-free rate is 3%, and you expect the market's return to be 9%. Use the CAPM to estimate an expected return for XYZ Corp.'s stock. e. Would you base your estimate of XYZ's equity cost of capital on your answer in part (a) or in part (d)? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year 2007 2008 Risk-free Return 2% 1% Print Market Return 5% - 39% Done XYZ Return 11% - 46% X

A firm's common stock has just paid a $3.00 dividend (Do), which is expected to grow at a constant rate of 6.0 percent each year. The beta of this stock is 1.30, the risk-free rate is 4.0 percent, and the expected return on the market is 10.0 percent. Determine how much you should be willing to pay (the intrinsic value) for this stock today. Assume that CAPM is the correct model for required returns. 536.55 $54.83 $63.97 $73:10 545.69

Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $34.8 and its beta is 1. The risk-free rate is 2% and the expected return on the market portfolio is 8%. What is the best guess for the cost of equity?

Assume the risk-free rate is 4% and the beta for a particular firm is 2, current firm share price is $35 and the market risk premium is 8%. A.Given the risk level, what is the one-year required rate of return (we will call this k)? B.If next year’s expected dividend is $3, use k from part A to solve for the expected next year’s price.

XYZ company has just paid a dividend of $1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future. Calculate the current stock value using the Gordon Constant growth model. [Note: you are supposed to show every step of your calculation and interpret the result.]  Evaluate Gordons growth model and explain its limitations and why in certain situations the growth model used in part (a) will create incorrect results? [Note: remember to use Harvard referencing to reference your sources]

XYZ company has just paid a dividend of $1.15. The required rate of return on the stock is 13.4%, and investors expect the dividend to grow at a constant 8% in the future. Calculate the current stock value using the Gordon Constant growth model.  Evaluate Gordons growth model focusing on its limitations and why in certain situations this growth model will create incorrect results?

Frontyard Inc has a beta of 0.9. The risk-free rate is 2.5% and the market risk premium is equal to 7%. The company is expected to pay a dividend of $2 per share. The current stock price is equal to $40. Dividends are expected to grow at a constant rate, g a. Calculate the required rate of return r, using the CAPM model The required rate of return r, is equal to b. Calculate the growth rate of dividends g c. Calculate Do Do S d. Calculate Ps De S Ps= S

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and the current dividend yield is 8.50%. Its beta is 1.33, the market risk premium is 14.50%, and the risk-free rate is 2.70%. a. Use the CAPM to estimate the firm's cost of equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. Now use the constant growth model to estimate the cost of equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent. c. Which of the two estimates is more reasonable? a. Cost of equity % % c. Which of the two estimates is more reasonable? b. Cost of equity

Assume that you are using the Capital Asset Pricing Model (CAPM) to find the expected return for a share of common stock.  Your research shows the following:                           Beta                             =          βi                      =          1.54                         Risk free rate               =          Rf                    =          2.5% per year                         Market return              =          E(RM)              =          6.5% per year   Based on this information, answer the following:   A.  Based on the beta, how does the stock's risk compare to the market overall?  On what do you base your answer?   B.  Based on the beta, how would you expect the stock's returns to react to a decrease in returns in the market overall?  Why?   C.  According to the CAPM and the information given above, what is the expected return E(Ri) for this stock?   D.  If the required rate of return on this stock were 7% per year, would you invest?  Why or why not?