Question
In: Finance
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the future. Shelby's common stock sells for $26 per share, its last dividend was $1.50, and the company will pay a dividend of $1.62 at the end of the current year.
Using the discounted cash flow approach, what is its cost of equity?
If the firm's beta is 1.4, the risk-free rate is 9%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach?
If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.)
On the basis of the results of parts a–c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 8% per year in the future. Shelby's common
stock sells for $26 per share, its last dividend was $1.50, and the
company will pay a dividend of $1.62 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity?
If the firm's beta is 1.4, the risk-free rate is 9%, and the
expected return on the market is...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 8% per year in the future. Shelby's common
stock sells for $23.75 per share, its last dividend was $2.50, and
the company will pay a dividend of $2.70 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
%
If the firm's beta is 2.1, the risk-free rate is 3%,...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 8% per year in the future. Shelby's common
stock sells for $25.50 per share, its last dividend was $1.50, and
the company will pay a dividend of $1.62 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
_______ %
If the firm's beta is 1.3, the risk-free rate is...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 3% per year in the future. Shelby's common
stock sells for $24.00 per share, its last dividend was $2.00, and
the company will pay a dividend of $2.06 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
%
If the firm's beta is 1.2, the risk-free rate is 4%,...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 7% per year in the future. Shelby's common
stock sells for $23.50 per share, its last dividend was $2.00, and
the company will pay a dividend of $2.14 at the end of the current
year. Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places. % If the firm's
beta is 0.7, the risk-free rate is 3%,...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 4% per year in the future. Shelby's common
stock sells for $28.75 per share, its last dividend was $2.50, and
the company will pay a dividend of $2.60 at the end of the current
year.
a. Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
b. If the firm's beta is 0.9, the risk-free rate is...
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 4% per year in the future. Shelby's common
stock sells for $23 per share, its last dividend was $2.50, and the
company will pay a dividend of $2.60 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
%
If the firm's beta is 1.8, the risk-free rate is 7%,...
The earnings, dividends, and stock price of Shelby Inc. areexpected to grow at 8% per...
The earnings, dividends, and stock price of Shelby Inc. are
expected to grow at 8% per year in the future. Shelby's common
stock sells for $27.00 per share, its last dividend was $2.50, and
the company will pay a dividend of $2.70 at the end of the current
year.Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places. %If the firm's beta is 1.1, the risk-free rate is 4%, and the
expected...
The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 3%...
The earnings, dividends, and common stock price of Shelby Inc.
are expected to grow at 3% per year in the future. Shelby's common
stock sells for $21.00 per share, its last dividend was $2.00, and
the company will pay a dividend of $2.06 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
%.......
If the firm's beta is 2.1, the risk-free rate is...
Cost of Equity The earnings, dividends, and common stock price of Shelby Inc. are expected to...
Cost of Equity
The earnings, dividends, and common stock price of Shelby Inc.
are expected to grow at 6% per year in the future. Shelby's common
stock sells for $21.00 per share, its last dividend was $2.00, and
the company will pay a dividend of $2.12 at the end of the current
year.
Using the discounted cash flow approach, what is its cost of
equity? Round your answer to two decimal places.
%
If the firm's beta is 1.5, the...
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