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What would be cost of equity using dividend pricing model

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Reference no: EM132964302

Problem 1: Stock in Argentina Inc. has a beta of 1.2. Treasury bills are currently yielding 3% and the market portfolio return is 9%. The most recent dividend was $2.00 per share and dividends are expected to grow at 5% a year indefinitely. The tax rate is 40% and the cost of debt is 12%. If the current share price is $45, what would be the cost of equity using:

a. The Capital Asset Pricing Model (CAPM)- 2 digit
b. The dividend pricing model- 2 digit
c. Using an average of the two numbers above calculate the WACC for Argentina Inc. assuming it has a capital structure consisting of 30% debt- 3 digit

Reference no: EM132964302

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