Booher Book Stores has a beta of 0.5. The yield on a 3-month T-bill is 3%, and the yield on a 10-year T-bond is 8%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 14%. What is the estimated cost of common equity using the CAPM? Round your answer to one decimal places. 9.5 %

Booher Book Stores has a beta of 0.5. The yield on a 3-month T-bill is 3%, and the yield on a 10-year T-bond is 8%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 14%. What is the estimated cost of common equity using the CAPM? Round your answer to one decimal places. 9.5 %

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

If the interest rate on T Bills is 2% and the market risk premium is 6%, what is the CAPM-implied expected return on a stock with a beta of 1.25? Enter your answer as a percentage rounded to 2 decimal places.
National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 a share. The dividend growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of equity using the CAPM? What is the estimated cost of equity using the dividend discount model? Re_CAPM Re_DGM de % % do
A company's 5-year bonds are yielding 10% per year. Treasury bonds with the same maturity are yielding 5.8% per year, and the real risk-free rate (r*) is 2.85%. The average inflation premium is 2.55%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.4%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.
what is the cost of Equity of KDP? Beta: 68 market risk premium:5.08% 3 month treasury yield: 5.34 % 10 year treasury yield: 4.27%
Palladian Records has a beta of 0.8. The current TT -bond rate is 2.4 %. The annual return on the stock market during the past 33 years was 7.7 %, but investors expect the annual future stock market return to be 7.1 %. Based on the CAPM, what is the firm's required return?
Cost of Equity: CAPM Booher Book Stores has a beta of 0.9. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 6%. The market risk premium is 7.5%, and the return on an average stock in the market last year was 13%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places. %
Treasury bill rates are 1.3%. The expected return of the market is 5.9%. If Waltham Corporation has a beta that is 25% higher than the market, what return should investors expect from Waltham Corporation stock to two decimal places?
Jersey Jewel Mining has a beta coefficient of 1.3. Currently the risk-free rate is 2 percent and the anticipated return on the market is 8 percent. JJM pays a $5.30 dividend that is growing at 6 percent annually. Do not round intermediate calculations. What is the required return for JJM? Round your answer to two decimal places. % Given the required return, what is the value of the stock? Round your answer to the nearest cent. $ If the stock is selling for $166, what should you do? The stock -Select-isis notItem 3 overvalued and -Select-shouldshould notItem 4 be purchased. If the beta coefficient declines to 1.2, what is the new value of the stock? Round your answer to the nearest cent. $ If the price remains $166, what course of action should you take given the valuation in d? The stock is -Select-overvaluedundervaluedItem 6 and -Select-shouldshould notItem 7 be purchased.
Cost of Equity: CAPM Booher Book Stores has a beta of 0.7. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 7%. The market risk premium is 6.5%, and the return on an average stock in the market last year was 13%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places. %
Booher Book Stores has a beta of 0.4. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 6%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 14%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.
Dhofar Packaging has a Beta = 1.8. The risk free rate on a treasury bill is currently 3.55% and the market return has averaged 22.85%.Calculate cost of equity Select one: a. 34.77% b. None c. 35% d. 38.29% e. 37.50%
Dhofar Power company has a beta of 1.5. The risk free rate on a treasury bill is currently 4% and the market return has averaged 18 %.What is the cost of the equity. Select one: a. 24 % b. None of these c. 25 % d. 22 %

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS