Epley Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 6.1 percent. The most recent stock price for the company is $78. a. Calculate the cost of equity using the DCF method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DCF method % b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method %
Epley Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 6.1 percent. The most recent stock price for the company is $78. a. Calculate the cost of equity using the DCF method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) DCF method % b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) SML method %
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
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Transcribed Image Text:Epley Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are
expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are
yielding 6.1 percent. The most recent stock price for the company is $78.
a. Calculate the cost of equity using the DCF method. (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
DCF method
%
b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
SML method
%
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