What is your estimate of callahan cost of common equity

Assignment Help Financial Management

Reference no: EM131552919

Cost of Common Equity The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $22.25 per share; its last dividend was $1.60; and it will pay a $1.68 dividend at the end of the current year.

a) Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. %

b) If the firm's beta is 0.90, the risk-free rate is 3%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. %

c) If the firm's bonds earn a return of 8%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. %

d) If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. %

Reference no: EM131552919

Questions Cloud

According to the Capital Asset Pricing Model : The stock of Verde Enviro-Systems has a beta of 1.7. according to the Capital Asset Pricing Model,

What rate would a zero coupon taxable bond to yield : what rate would a zero coupon taxable bond to yield before taxes if it were to have a 4.7 percent after-tax yield?

Identify an organization you are familiar with that needs : Identify an organization you are familiar with that needs to make a change in its culture, and then use Nadler's Twelve Interventions for Operating Environment.

Electric company uses only debt and common equity : WACC Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity? Which projects should Empire accept?

What is your estimate of callahan cost of common equity : Using the DCF approach, what is its cost of common equity? what is your estimate of Callahan's cost of common equity?

Assuming floating bond has no default risk : Assuming the floating bond has no default risk, what is the price today of the bond?

What would be the cost of equity from new stock : If the company issued new stock, it would incur a 16% flotation cost. What would be the cost of equity from new stock?

What is its cost of common equity and wacc : What is its cost of common equity and its WACC?

The dividend growth rate is expected : The dividend growth rate is expected to be 6%. your company's tax rate is 34%. What is the WACC for your company?

User Account

All Pages