What would be your estimate of shelbys cost of equity

Reference no: EM133377509

Cost of Equity

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby's common stock sells for $29.50 per share, its last dividend was $2.50, and the company will pay a dividend of $2.65 at the end of the current year.

If the firm's bonds earn a return of 10%, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? Round your answer to two decimal places. (Hint: Use the midpoint of the risk premium range.)
%

On the basis of the results of parts a through c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places.

Reference no: EM133377509

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