Common equity using the capm approach

Assignment Help Financial Accounting

Reference no: EM1314170

Cost of common equity

The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 11% per year in the future. Carpetto's comon stock sells for $23 oer share, its last dividend was $2.00, and it will pay a dividend of $2.14 at the end of the current year.

a) Using the DCF approach, what is its cost of common equity?

b) If the firm's beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach?

c) If the firm's bonds earn a return of 12%, what will Rs be based on the bond-yield-plus-risk-premium approach, using the midpoint of the risk premium range?

d) Assuming you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity?

Reference no: EM1314170

Questions Cloud

Which projects should midwest accept : What is its cost of common equity and Which projects should Midwest accept - Cost of common equity and WACC.

Evaluate its cost of common equity : Evaluate its cost of common equity and What is the WACC - Cost of common equity and WACC

Find the cost of common equity : Find the cost of common equity and its WACC and Cost of common equity and WACC - target capital structure of 40% debt and 60% common equity,

Find the firm''s cost of common equity : Find the firm's cost of common equity using the CAPM approach and what is your estimate of Carpetto's cost of common equity?

Common equity using the capm approach : what is its cost of common equity and what will be the firm's cost of common equity using the CAPM approach

Find the company''s cost of common equity : Find the company's cost of common equity if all of its equity comes from retained earnings and What would the cost of equity from new stock be?

Objective type questions on payback period and npv and irr : Objective type questions on payback period, NPV and IRR and What is the internal rate of return that Turnbull can earn on this project

Computation of selection of the project : Computation of selection of the project and evaluating two mutually exclusive projects and Costs and cash flows are given in the following table

Computation of net present value and cost and cash flows : Computation of Net present value and Cost and Cash flows are shown in the table

User Account

All Pages