Tanrun Inc. is expected to pay an annual dividend of $0.45 per share in one year. Analysts expect the firm's dividends to grow by 4% forever. Its stock price is $38.8 and its beta is 1. The risk-free rate is 2% and the expected market risk premium is 4.5%.   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.

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $22 per share; its last dividend was $2.00; and it will pay a $2.12 dividend at the end of the current year. 1. Using the DCF approach, what is its cost of common equity? 2. If the firm's beta is 1.2, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. 3. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations.

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.

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

Mackenzie Company has a price of $31 and will issue a dividend of $2.00 next year. It has a beta of 1.5, the risk-free rate is 5.4%, and the market risk premium is estimated to be 4.8%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)?

You want to check if GRBH stock is fairly priced in the markets by using the fundamental analysis. For this purpose, you have gathered the following information: GRBH pays dividends once a year and the next dividend payment is expected to be made in one year. You project the EPS of the first and second year to be $5 and $7 respectively. The company dividend payout ratio is stable at 0.2. At the end of the second year, you assume that the company would become the average company in the industry. The industry average PE ratio is 8. You believe that the appropriate required rate of return on GRBH stock is 10% (CCR per annum). And the current market price of GRBH stock is $45.  ind the present value of GRBH stock based on the information above. Is the stock over- or under-priced?

Franklin Corporation is expected to pay a dividend of $1.24 per share at the end of the year (D1 = $1.24). The stock sells for $32.40 per share, and its required rate of return is 7.2%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate? (Round your answer to 2 decimal places.) Please work out the problem do not use excel.

Earnings this year will be $6 per share, and investors expect a rate of return of 8% on stocks facing the same risks as Web Cites. a. What is the sustainable growth rate? b. What is the stock price? c. What is the present value of growth opportunities (PVGO)? d. What is the P/E ratio? e. What would the price and P/E ratio be if the firm paid out all earnings as dividends? (Do not round intermediate calculations. Round your answers to 2 decimal places.) > Answer is complete but not entirely correct. a. Sustainable growth rate 2.00 % b. Stock price $ 91.84 x C. PVGO $ (13.78) X d. P/E ratio 10.20 x e. Price $ 75.00 P/E ratio 12.50

Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.3, the risk-free rate is 5.3%, and the market risk premium is estimated to be 5.1%. a. Estimate the equity cost of capital for Mackenzie. b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? a. Estimate the equity cost of capital for Mackenzie. The equity cost of capital for Mackenzie is %. (Round to two decimal places.) b. Under the CGDM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part (a)? The expected growth rate for dividends is %. (Round to two decimal places.)

An analyst produces the following series of annual dividend forecasts for company D: Expected dividend (end of) year t+1 = 10 euros; Expected dividend (end of) year t+2 = 20 euros; Expected dividend (end of) year t+3 = 10 euros. The analyst further expects that company D dividend will grow indefinitely at a rate of 2 percent after year t+3. Company D cost of equity equals 10 percent. Under these assumptions, calculate the analysts estimate of company D equity value at the end of year t.