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)?

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jeff jeffy answered 1 year ago

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