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What should be the cost of common stock

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Problem 1: The 10-year US Treasury bond has a yield-to-maturity of 3.5%. Your financial advisor suggests the current market risk premium is 5.5%. If your company's beta is 1.25, what should be the cost of common stock?

Problem 2: Your business's dividend last year, D0, was $1.28. The business is expecting a growth rate in earnings and dividends of 6.5% in the future, i.e., g = 0.065. What is the current price of the common stock today (P0)?

Reference no: EM132761690

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