Calculate cost of equity with capital asset pricing model

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Reference no: EM131185853

MARKET DATA:

U.S. Treasury rate: 3.5%

Stock market total return: 12.1%

Inflation 3.0%

COMPANY DATA:

Dividend growth rate: 4.6%

Outstanding bond YTM: 4.0%

Next year’s expected dividend: $1.50

Tax rate: 40%

Shares outstanding: 100,000

Beta: 1.05 Stock price $19.50

Debt / capital ratio: 25%

Calculate the…

A. Cost of debt

B. Cost of equity with the Capital Asset Pricing Model (CAPM)

C. Cost of equity with the Dividend Growth Model (DGM)DGM

D. WACC with book value

Reference no: EM131185853

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