Firm cost of common equity

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1. Jesse Corp.'s stock has a Beta of 0.89. The risk-free rate is 4%, and the expected market return is 11%. The firm's cost of common equity, Re, is _____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.

2. PeteCorp's stock has a Beta of 1.4. Its dividend is expected to be $2.25 next year, and will grow by 5% per year after that indefinitely. Assume the risk-free rate is 4%, and the Market Risk Premium is 7%. The stock price would currently be estimated to be $________. Round your FINAL answer to 2 decimal places (example: 12.3456 = 12.35), but do NOT round any intermediate work.

3. Pollo Inc.'s 7.6% bonds have a YTM of 10.83%. The estimated risk premium between the company's bonds and stocks is 4%. Pollo's cost of common equity, Re, is ____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process.

Reference no: EM131964001

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