What is the firm's cost of equity on these financial accounting question? National Home Rentals has a beta of 1.38, a stock price of $19, andrecently paid an annual dividend of $0.94 a share. The dividend growthrate is 4.5 percent. The market has a 10.6 percent rate of return and arisk premium of 7.5 percent. What is the firm's cost of equity?

As per CAPM, Market Risk Premium = Market Rate-Risk free rate7.5% = 10.6%-Risk free rateRisk free…

Answered: National Home Rentals has a beta of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Eastern Electric currently pays a dividend of about $1.64 per share and sells for $27 a share. If its dividend growth rate is 7.0 %, and the payout ratio is 0.53 , what must be the ROE of the firm?
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National Home Rentals has a beta of 1.38, a stock price of $19, and recently paid an annual dividend of $0.94 a share. The dividend growth rate is 4.5 percent. The market has a 10.6 percent rate of return and a risk premium of 7.5 percent. What is the firm's cost of equity?