Calculating the cost of equity

Assignment Help Financial Management

Reference no: EM132056386

Calculating the Cost of Equity

Floyd Industries stock has a beta of 1.20. The company just paid a dividend of $.50, and the dividends are expected to grow at 6 percent per year. The expected return on the market is 11 percent, and Treasury bills are yielding 5.6 percent. The most recent stock price for the company is $73.

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 %

References

Reference no: EM132056386

Questions Cloud

Pure profits from covered interest arbitrage activities : According to IRPT, only the most skilled arbitrageurs are able to earn pure profits from their covered interest arbitrage activities.

Identifies the research method and design of the study : Identifies the specific research method and design of the study and articulates the authors' reasoning for this selection as appropriate for the study's purpose

Prepare a cash flows statement and a compilation report : This case addresses the compilation and preparation of a set of financial statements for a first-year company's operations.

How globalization and technology changes have impacted : Apply the industrial organization model and the resource-based model to determine how your corporation could earn above-average returns.

Calculating the cost of equity : Floyd Industries stock has a beta of 1.20. The company just paid a dividend of $.50, and the dividends are expected to grow at 6 percent per year.

Describe an experience with mass media that affected you : Describe one or two (1-2) experiences with mass media (movies or television) that affected you positively or negatively, explaining when, how, and why.

What is the company debt–equity ratio : The company’s cost of equity is 14 percent, and its cost of debt is 8.2 percent. The tax rate is 35 percent. What is the company’s debt–equity ratio?

Identify and evaluate external influences negatively : Identify and evaluate external influences that are positively and negatively affecting workforce needs in health care delivery.

Evaluate the level of system security : Evaluate the level of system security (i.e., high, medium, low) needed to ensure information integrity within automated business systems.

User Account

All Pages