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Scotty's next dividend payment is expected to be $2.25 and its stock is currently $65 per share. Scotty has a beta of 0.8 and is expected to grow at 10% for the foreseeable future. Compute Scotty's cost of equity using both CAPM and the Dividend Discount Model. Assume that the S&P 500 will return 10% and the T-Bill rate is 3%. O CAPM: 8.2%; Dividend Discount Model: 9.56% CAPM: 8.6%; Dividend Discount Model: 13.46% CAPM: 9.7%; Dividend Discount Model: 12.56% O CAPM: 10.1%; Dividend Discount Model: 11.46%

Scotty's next dividend payment is expected to be $2.25 and its stock is currently $65 per share. Scotty has a beta of 0.8 and is expected to grow at 10% for the foreseeable future. Compute Scotty's cost of equity using both CAPM and the Dividend Discount Model. Assume that the S&P 500 will return 10% and the T-Bill rate is 3%. O CAPM: 8.2%; Dividend Discount Model: 9.56% CAPM: 8.6%; Dividend Discount Model: 13.46% CAPM: 9.7%; Dividend Discount Model: 12.56% O CAPM: 10.1%; Dividend Discount Model: 11.46%

Essentials Of Investments
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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Scotty's next dividend payment is expected to be $2.25 and its stock is currently $65 per share. Scotty has a beta of 0.8 and is expected to grow at 10% for the foreseeable future. Compute Scotty's cost of equity using both CAPM and the Dividend Discount Model. Assume that the S&P 500 will return 10% and the T-Bill rate is 3%. O CAPM: 8.2%; Dividend Discount Model: 9.56% CAPM: 8.6%; Dividend Discount Model: 13.46% O CAPM: 9.7%; Dividend Discount Model: 12.56% CAPM: 10.1%; Dividend Discount Model: 11.46%
Transcribed Image Text:Scotty's next dividend payment is expected to be $2.25 and its stock is currently $65 per share. Scotty has a beta of 0.8 and is expected to grow at 10% for the foreseeable future. Compute Scotty's cost of equity using both CAPM and the Dividend Discount Model. Assume that the S&P 500 will return 10% and the T-Bill rate is 3%. O CAPM: 8.2%; Dividend Discount Model: 9.56% CAPM: 8.6%; Dividend Discount Model: 13.46% O CAPM: 9.7%; Dividend Discount Model: 12.56% CAPM: 10.1%; Dividend Discount Model: 11.46%
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