4) A company XYZ has a beta of 1.3. The company just paid a dividend of...

4) A company XYZ has a beta of 1.3. The company just paid a dividend of $0.95, and the dividends are set to grow at the rate of 4.5% a year. The expected return on the market index is 11% and T bills are yielding 4.3% The recent stock price is $64.

Calculate the cost of equity using the dividend discount model method.
Calculate the cost of equity using the SML method.
Why are the answers different in parts (a) and (b)?

Expert Solution

jeff jeffy answered 2 years ago

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