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1. Suppose your company has an equity beta of 1.0 and the current risk-free rate is 6.0%. If the expected market risk premium is 8.6%, what is your cost of equity capital?
8.1%
9.6%
10.3%
14.6%.
2. A stock sells for $20 per share, its next dividend expected to pay (D1) is $1.00, and its growth rate is a constant 6%. What is its cost of common stock?
5.3%
11.0%
11.3%
11.6%
A young stockbroker was rather overwhelmed by a flood of new clients. Assunta, one of his clients, had purchased XYZ Corp. stock through the broker at a price of $35 per share. The price had gone down to $29 by the time Assunta telephoned the broker...
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