Calculate the cost of equity using the DDM method

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Reference no: EM131847860

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 5 percent. The most recent stock price for Floyd is $67.

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

SML method %

Reference no: EM131847860

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