Find the required return on equity

Assignment Help Finance Basics

Reference no: EM13292941

AAA has only stock and bonds in its capital structure. Balance sheet information: Long term debt (par value--NOT number of bonds) = $20,000,000, Common equity and retained earings = $17,000,000, and Shares of stock outstanding = 1,000,000. Bond information: Bond price ($1,000 par value per bond) = $1,150.00, bond annual coupon rate with semiannual payments = 6.0%, and bond maturity = 10 years. Stock information: Stock price = $40.00, beta = 1.25, recent dividend (D0) = $3.00, dividend growth rate = 4.00%. Other information: risk free rate = 4.0%, the market risk premium = 6.5%, tax rate = 40.0%. Using the average of the CAPM and DCF estimates, find the required return on equity.

Reference no: EM13292941

Questions Cloud

Calculate the frequency of conductor emfs in both the cases : he armature at the other end of thecommutator is tapped and connected to balanced 3-Phase voltages, sothat a rotating field is produced, The speed of this rotating fieldis 3000 r.p.m. (1) clockwise and (2) anticlockwise,.Find thefrequency of the b..

What will be the nominal dollar amount of the last withdraw : Assuming a 21-year withdrawal period, what will be the nominal dollar amount of the last withdraw?

Find the average net force exerted on riders by the magnets : In the amusement park ride known as Magic Mountain Superman, powerful magnets accelerate a car and its riders from rest to 34.1 m/s in a time of 6.79 s

Define data for the decomposition of hydrogen peroxide : Data for the decomposition of hydrogen peroxide at some set temperature T is include below. The rate law depends only on the concentration of H2O2.

Find the required return on equity : Other information: risk free rate = 4.0%, the market risk premium = 6.5%, tax rate = 40.0%. Using the average of the CAPM and DCF estimates, find the required return on equity.

Design a sequence detector to detect the sequences : design a sequence detector to detect the sequences 010 and 1001 with repetition permitted in each case.

How to decreasing amount of energy released : Arrange the following ionic compounds in order of decreasing amount of energy released in lattice formation: LiF, CaO, InN and KBr

Determine the maximum current in the resistor : A 2.00 nF capacitor with an initial charge of 5.12 µC is discharged through a 1.76 k resistor. What is the maximum current in the resistor

Find brush separation in electrical and mechanical degrees : A 4-pole, 50 Hz scharg motor, running at no-load, gives minimum and maximum speeds of 500 and 2500 r.p.m. respectively, for brush separation of 180 electrical degree (i.e. one pole pitch).

User Account

All Pages