Suppose the stock in Watta Corporation has a beta of 0.8. The market risk premium is...

Suppose the stock in Watta Corporation has a beta of 0.8. The market risk premium is 6 percent, and the risk-free rate is 3 percent. Watta’s dividend will be $1.20 per share next year and the dividend is expected to grow at 6 percent indefinitely. The stock currently sells for $45 per share. What is Watta’s cost of equity by the CAPM? ______%

What is Watta’s cost of equity by the dividend growth model? ______%

Suppose the market values of Watta’s debt and equity are $10 million and $20 million respectively. Its cost of debt is 9 percent before taxes and the tax rate is 35 percent. What is its WACC? Please use the cost of equity by the CAPM in this question.

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jeff jeffy answered 1 year ago

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