The firm cost of equity based on the capm approach

Reference no: EM132002269

The earnings, dividends, and stock price of Yoyo Inc. are expected to grow at 8% per year in the future. Yoyo's common stock sells for $25 per share, its last dividend was $2.00, and the company will pay a dividend of $2.10 at the end of the end of the current year.

a. using the discounted cash flow approach, what is its cost of equity?

b. If the firm's beta is 1.3, the risk-free rate is 5%, and the expected return on the market is 9%, then what would be the firm's cost of equity based on the CAPM approach?

Reference no: EM132002269

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