Using discounted cash flow approach to find cost of equity

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Reference no: EM1361130

The earnings, dividends, and stock price of Carpetto Tech Inc, are expected tp grow at 7 % per year in the future. Carpetto's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend for $2.14 at the end of the current year.

A.Using the discounted cash flow approach, that is its cost of equity?

b. If the firm's beta is 1.6, the risk free rate is 9 %, and the expected return on the market is 13%, what will be the firm's cost of equity using the CAPM approach?

c. If the firm's bond's earn a return a return of 12%, what will rs be suing the bond-yield-plus-risk-premium approach?

d. On the basis of the results of parts a through c, what would you estimate Carpetto's cost of equity to be?

Reference no: EM1361130

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