The market risk premium-what is the cost of equity

Assignment Help Financial Management

Reference no: EM131354145

Southern Home Cookin' has a market price of $13 and a beta of 1.12. The return on the U.S. Treasury bill is 2.5 percent and the market risk premium is 6.8 percent. What is the cost of equity?

Reference no: EM131354145

Questions Cloud

How much money can be withdrawn each year : How much money can be withdrawn each year over a 10 year period from an account that $100,000 in it, if the account earns 6% interest copounded annually. Assume there is no money left in the account after the 10th withdrawal.

Revised expected return : A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. If the expected rate of return on the stock is 14 percent, what is the revised e..

Disadvantage of re-working the keyboards : The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,900, they could be sold for $18,800. Alternatively, the keyboards could be sold “as is” for $8,700. What..

Boulder furniture has bonds outstanding that mature : Boulder Furniture has bonds outstanding that mature in 15 years, have a 6 percent coupon, and pay interest annually. These bonds have a face value of $1,000 and a current market price of $1,075. What is the company's aftertax cost of debt if its tax ..

The market risk premium-what is the cost of equity : Southern Home Cookin' has a market price of $13 and a beta of 1.12. The return on the U.S. Treasury bill is 2.5 percent and the market risk premium is 6.8 percent. What is the cost of equity?

Company is estimating its optimal capital structure : A company is estimating its optimal capital structure. Now the company has a capital structure that consists of 20% debt and 80% equity, based on market values (debt to equity D/S ratio is 0.25). The risk-free rate (rRF) is 5% and the market risk pre..

Calculate the coinsurance and amount insurance will pay : You work for a billing service. You have been assigned the duty of calculating what the patient owes and what the insurance company owes, so that you can determine what revenue to expect for these services. calculate the coinsurance; amount insurance..

What would be an appropriate estimate of the stock price : A company is expected to pay a dividend of $1.1 per share one year from now and $1.78 in two years. You estimate the risk-free rate to be 3.8% per year and the expected market risk premium to be 5.3% per year. After year 2, you expect the dividend to..

What changes will occur on the company balance sheet : XYZ Ltd has Assets of $300,000,000, $30,000,000 of which is Cash. Debt is $100,000,000. If XYZ repurchases $10,000,000. How does it affect Equity? What changes will occur on the company’s balance sheet? What will its new leverage ratio be?

User Account

All Pages