Estimate of the company cost of equity

Assignment Help Financial Accounting
Reference no: EM131264370

Stock in Daenerys Industries has a beta of 1.3. The market risk premium is 8 percent, and T-bills are currently yielding 4.5 percent. The company’s most recent dividend was $1.70 per share, and dividends are expected to grow at an annual rate of 7 percent indefinitely.

If the stock sells for $34 per share, what is your best estimate of the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Reference no: EM131264370

Questions Cloud

Newly formed corporation subsequent to the exchange : Company A, Inc. is a distributor of office equipment. Company A has a wholly owned susidiary, JK, a equipment manufacturer. Company A has been talking to company B about forming a new business entity. Company B is also a distributor of office equipme..
Annual interest rate and annual payments : The Taylor's have a 9 year old daughter that they wish to provide her college education. They estimate that it will cost $30,000 per year for 4 years when she decides to enter college 10 years from now. How much would the Taylors have to invest today..
Invest for fractional parts of the year : Kunkle company wishes to earn 20% annually on its investments. If it makes an investment that equals or exceeds that rate it considers it a success. Assume that it invests $2 million and gets $500,000 in return at the end of each year for X years. Wh..
The lessee amortize the leased property : A lease is classified as a capital lease because it contains a bargain purchase option. Over what period of time should the lessee amortize the leased property? The summary of significant accounting policies should disclose the
Estimate of the company cost of equity : Stock in Daenerys Industries has a beta of 1.3. The market risk premium is 8 percent, and T-bills are currently yielding 4.5 percent. The company’s most recent dividend was $1.70 per share, and dividends are expected to grow at an annual rate of 7 pe..
Analyze the need for unbiased financial reporting : Analyze the need for unbiased financial reporting. Based on your analysis, determine at least two (2) drivers that may cause financial reporting to be biased. Provide a rationale to support your response. Analyze the audit opinion formulation process..
Property estimated economic life at the inception of lease : One criterion for a capital lease is that the term of the lease must equal a minimum percentage of the leased property's estimated economic life at the inception of the lease. What is this minimum percentage? How much will Salas recognize on its 20X4..
The beta coefficient : Given that the Beta Coefficient (p) of Chrysler is.97; American Online is 1.5; and Sears is 1.00. The three companies are each offering you a rate of 15% on their 30year bond. (a) Which one of the companies will you invest in, ll things considered? (..

Reviews

Write a Review

Financial Accounting Questions & Answers

  Assuming beginning inventories were acquired when the

assuming beginning inventories were acquired when the general price index level was 128 prepare kashmir enterprises

  Impact of change in credit policy on debt ratio

Impact of change in credit policy on the debt ratio - what will Collins' debt ratio (Total debt/Total assets) be after the change in DSO is reflected in the balance sheet?

  Declining-balance method of depreciation-conveyor equipment

For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2010 for $2,560,000. Its useful life was estimated to be six years with a $160,000 residual value..

  Neither issued nor retired any common stock

Marcus Nurseries Inc.'s 2012 balance sheet showed total common equity of $2,050,000, which included $1,750,000 of retained earnings. The company had 100,000 shares of stock outstanding which sold at a price of $57.25 per share. If the firm had net in..

  Illustrate what is the amount of lebron gross income

Lebron received $50,000 of compensation from his employer and he received $400 interest from a municipal bond. Illustrate what is the amount of Lebron's gross income from these items?

  Prepare the service revenue budget for garza and neely

Prepare the service revenue budget for 2012 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

  What might be some of the alternative measure of performance

If ‘profit' maximisation is biased towards maximising the interest of only one stakeholder group, would you expect that over time there will be less emphasis on profits and more emphasis on other performance indicators?

  Gross revenue and gross operating profit

What is the management fee 1) on a per available room basis and 2) as a percentage of total revenue for a 255-room hotel located in California that had an occupancy level of 62%, ADR of $84.53, a room revenue to total revenue % of 56.4%, and a gross ..

  Estimate of the ending balance of accounts receivable

Your accounts receivable clerk, Mitra Adams, to whom you pay a salary of $2,655 per month, has just purchased a new Acura. You decided to test the accuracy of the accounts receivable balance of $207,090 as shown in the ledger. Compute an estimate of ..

  What is equivalent units of production used to compute unit

Department W had 2,400 units, one-third completed at the beginning of the period; 16,000 units were transferred to Department X from Department W during the period; and 1,800 units were one-half completed at the end of the period. Assume the completi..

  Discuss the at-risk limitations relating to individuals

Before the passage of the 1986 Act, Congress attempted to impose restrictions on the abuses associated with the at-risk provisions of 1976 as set out in Code Section 465. In summary, the at-risk rules disallowed losses in excess of the investment. Di..

  Heathrow issues 2800000 of 8 percent 15-year bonds dated

heathrow issues 2800000 of 8 percent 15-year bonds dated january 1 2011 that pays interest semiannually on 30th june

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd