What is your best estimate of the company cost of equity

Assignment Help Financial Management
Reference no: EM131493289

Common shares of App Invent Inc. have a beta of 0.9. The market risk premium is 8 percent, and T-bills are currently yielding 1 percent. The company's most recent dividend was $1.50 per share, and dividends are expected to grow at a 3 percent annual rate indefinitely. If the stock sells for $30 per share, what is your best estimate of the company's cost of equity? (Use both methods of estimation and average your results)

Please show your work including formulas as best as possible,

Reference no: EM131493289

Questions Cloud

Annual carrying cost of the postcard inventory : What is the annual carrying cost of the postcard inventory? Round the answer to two decimal places.
Annual cost of trade credit under these terms : What is the effective annual cost of trade credit under these terms? Use a 365-day year.
Explain what net present value : Explain what net present value is and how you would go about calculating it? Quite often, host countries have a love-hate relationship with MNE's.Why?
Discuss ternary fsk signal : A "ternary" FSK signal can be defined as where only one of the coefficients is equal to 1 at a time and the other two are equal to zero.
What is your best estimate of the company cost of equity : Common shares of App Invent Inc. have a beta of 0.9. If the stock sells for $30 per share, what is your best estimate of the company's cost of equity?
Implicit cost of trade credit : Bloomies sells on terms of 1/20, net 80. What is the implicit cost of trade credit under these terms? Use a 365-day year.
Assuming the stock returns follow normal distribution : what is the probability that this stock will earn at least 20% in any one given year assuming the stock returns follow normal distribution?
What annual savings can ford expect : What annual savings can Ford expect if this system is implemented? Use a 365-day year. Round the answer to two decimal places.
How much should they set aside monthly to afford the remodel : Tim and Denise just bought a very old house.how much should they set aside monthly to afford the remodel in 10 years?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the npv of agreeing to write the book

Bill ClintonBill Clinton reportedly was paid an advance of $10.0 million to write his book My LifeMy Life. Suppose the book took three years to write. In the time he spent? writing, Clinton could have been paid to make speeches. What is the NPV of ag..

  Conduct sensitivity analysis for revenues

Conduct a sensitivity analysis for revenues by increasing revenues by 10% above the best estimate, and then by decreasing revenues by 10% below the best estimate. MAXIMIZE THE USE OF FORMULAS! The SCFE Co. wants to add a production line.

  The elasticity of demand-inverse of price to quantity demand

The elasticity of demand: equals the inverse of price to quantity demanded. measures how far the demand curve shifts from a change in price.

  What was the flotation cost as a percentage of funds raised

The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.30 for each of the 15 million shares sold. The initial offering price was $21.00 per share, and the stock rose to $23.40 per share in the first few minutes of t..

  What is the cost of internal common equity

Jiffy Co. expects to pay a dividend of $3.00 per share in one year. The current price of Jiffy common stock is $60 per share. Flotation costs are $3.00 per share when Jiffy issues new stock. What is the cost of internal common equity if the long-term..

  How long will it take her to pay off the debt

Phoebe realizes that she has charged too much on her credit card and has racked up $5,600 in debt. If she can pay $225 each month and the card charges 16 percent APR (compounded monthly), how long will it take her to pay off the debt?

  Discuss the concept of a zero cost collar

Discuss the concept of a zero cost collar and its usefulness. With the aid of a suitable example, illustrate how it works. Compare the use of covered calls and protective puts to managing risk exposure to individual securities.

  Reinvest in its faster-growing snack business

Speculate as to why Kraft chose not to divest its grocery business and use the proceeds either to reinvest in its faster-growing snack business, to buy back its stock, or a combination of the two.

  Using the add-on method

Using the add-on method, calculate the APR of a loan for $11,350 at 9% for 3 years. (Do not round intermediate calculations. Round your answer to the nearest tenth percent.)

  Each quarter into retirement account

Starting at age 50, a woman puts $1600 at the end of each quarter into a retirement account that pays 7% interest compounded quarterly. When she reaches age 60, she withdraws the entire amount and places it in a mutual fund account that pays 9% compo..

  How much needs to be deposited to set up the annuity

A grandfather sets up a trust for his only grandchild. The trust consists of an annuity that will pay $5,000 monthly to the grandchild for 18 years. The annuity pays an annual return of 5% and makes the payments monthly at the end of the month. The a..

  What is the accounts payable balance at the end of january

Krista’s sells $4,000 worth of goods in December, $2,800 worth in January, $3,200 in February and $3,500 in March. The wholesale cost is 65 percent of the retail price. The firm has a receivables period of 30 days, a payables period of 60 days, and b..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd