What is ibm cost of equity capital

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Question - IBM expects to pay a dividend of $4 next year and expects these dividends to grow at 7% a year. The price of IBM is $90 per share. Your estimate of the market risk premium is 6%. The risk-free rate of return is 5% and IBM has a beta of 1.2. What is IBM's cost of equity capital using the two methodologies, discounted growth model (DGM) and capital asset pricing model (CAPM) respectively?

a) 10.23%, 10.8%

b) 9.65%, 10.2%

c) 10.89%, 11.2%

d) 11.44%, 12.2%

Reference no: EM132959207

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