Question
In: Finance
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5% Market risk premium is = 5%
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5% Market risk premium is = 5%; company's beta is 0.7; D1 = $2.00; current stock price is $30.00; future growth of dividends is 6%.
Solutions
Expert Solution
Cost of equity = (D1 / share price) + growth rate
Cost of equity = (2 / 30) + 0.06
Cost of equity = 0.1267 or 12.67%
jeff jeffy answered 2 years agoRelated Solutions
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5%...
Suppose that a financial analyst collected the following data:
rate of return on T-bill is 2.5%
Market risk premium is = 5%; company's beta is 0.7;
D1 = $2.00; current stock price is
$30.00; future growth of dividends is 6%.
What estimate should the analyst use?
Suppose that a financial analyst collected the following data: rate of return on T-bill is 2.5%...
Suppose that a financial analyst collected the following data:
rate of return on T-bill is 2.5%
Market risk premium is = 5%; company's beta is 0.7;
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Here are data on two companies. The T-bill rate is 4% and the market risk premium...
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Company
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Everything $5
Forecasted Return
12%
11%
Standard Deviation of Returns
8%
10%
Beta
1.5
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1) What would be the fair return for each company, according to the
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client.
3)...
Here are data on two companies. The T-bill rate is 4% and the market risk premium...
Here are data on two companies. The T-bill rate is 4% and the
market risk premium is 6%.
Company
$1
Discount Store
Everything $5
Forecast return
12%
11%
Standard deviation of
returns
8%
10%
Beta
1.5
1.0
Based on the fair return and according to the capital asset pricing
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Company
Expected Return
$1 Discount Store
(Click to
select)Properly pricedUnderpricedOverpriced %
Everything $5
(Click to select)UnderpricedProperly pricedOverpriced %
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