Compute the current value of stock

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Reference no: EM132028928

1. Given a current dividend of 3, a required return of 10% and a dividend growth rate of 2% forever, compute the current value of this stock.

38.25

37.5

150

2. A firm has a debt-equity ratio of 1.0. The required return on the firm’s assets is 11.1% and the pre-tax cost of debt is 4.1%. Ignore taxes. What is the firm’s cost of equity?

15.3%

18.1%

23.1%

21.7%

Reference no: EM132028928

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