Company cost of capital using capital asset pricing model

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Reference no: EM131926920

Bernama Bhd is an all equity company. The company has issued 10 million shares at $1 par, with a market price of $45 in the exchange. Last year, the shareholders had received a dividend of $2.50. The company was estimated to have a beta of 0.66, and is expected to grow at 4% in the future. The Treasury rate is 4.5% and the market offers 20% annually. Calculate the company’s cost of capital using:

a) the Gordon’s dividend growth model and

b) the Capital Asset Pricing Model.

Reference no: EM131926920

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