The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's common stock sells for $21 per share, its last dividend was $2.00, and the company will pay a dividend of $2.08 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 1.1, the risk-free rate is 10%, and the expected return on the market is 14%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. % On the basis of the results of parts a–c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's common stock sells for $21 per share, its last dividend was $2.00, and the company will pay a dividend of $2.08 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 1.1, the risk-free rate is 10%, and the expected return on the market is 14%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. % On the basis of the results of parts a–c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %

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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The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's common stock sells for $21 per share, its last dividend was $2.00, and the company will pay a dividend of $2.08 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % If the firm's beta is 1.8, the risk-free rate is 7%, and the expected return on the market is 10%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 9%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. % On the basis of the results of parts a–c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer…
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the future. Shelby's common stock sells for $26 per share, its last dividend was $2.00, and the company will pay a dividend of $2.16 at the end of the current year. a. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. 16.31 % b. If the firm's beta is 1.1, the risk-free rate is 9%, and the expected return on the market is 14%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. 14.50% c. If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. 14 % d. On the basis of the results of parts a-c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally.…
The current dividend of Best Food Org. is $2.31 and is expected to grow at 11.00% for seven years. After the first seven years, the growth rate of the dividends expects to grow at a constant 4.71% into the future. If the cost of equity is 8.6%, what is the number or value that you need to use in CF7 in Excel or Financial Calculator when discounting the cash flow? $116.30 $133.89 $121.10 $135.
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7%per year in the future. Shelby’s common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of thecurrent year.a. Using the discounted cash flow approach, what is its cost of equity?b. If the firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on themarket is 13%, what will be the firm’s cost of equity using the CAPMapproach?c. If the firm’s bonds earn a return of 12%, what will rs be using the bond-yieldplus-risk-premium approach? (Hint: Use the midpoint of the risk premiumrange.)d. On the basis of the results of parts a through c, what would you estimateShelby’s cost of equity to be
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The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $21.25 per share; its last dividend was $1.80; and it will pay a $1.89 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 0.7, the risk-free rate is 4%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % If the firm's bonds earn a return of 13%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the judgmental risk premium of 4% in your calculations. Round your answer to two decimal places. % If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not…
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