Estimate of cdb cost of equity

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Reference no: EM132293079

Stock in CDB Industries has a beta of 1.05. The market risk premium is 7 percent, and T-bills are currently yielding 4.0 percent. CDB's most recent dividend was $2.90 per share, and dividends are expected to grow at a 5 percent annual rate indefinitely. The stock sells for $51 per share.

Required: Using the CAPM, what is your estimate of CDB's cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity 11.35%

Using the dividend discount model, what is your estimate of CDB's cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity % 

What is your best estimate of CDB's cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of equity  11.16%

Reference no: EM132293079

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