Calculate cost of equity using the sml method

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Floyd Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent per year. The expected return on the market is 12 percent, and Treasury bills are yielding 6.4 percent. The most recent stock price for the company is $81.

a. Calculate the cost of equity using the DDM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DDM method %

b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method %

Reference no: EM131862981

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