Mackenzie Company has a price of $32 and will issue a dividend of $2.00 next year. It has a beta of 1.1, the risk-freerate is 5.9%, and the market risk premium is estimated to be 4.8%.a. Estimate the equity cost of capital for Mackenzie.b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost ofcapital as in part (a)?a. Estimate the equity cost of capital for Mackenzie.The equity cost of capital for Mackenzie is %. (Round to two decimal places.)

a.Risk free rate = 5.90%Risk Premium = 4.80%Beta = 1.10Cost of Equity is calculated below using CAPM…

Answered: Mackenzie Company has a price of $32…

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

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