Stock in Eduardo Industries has a beta of .92. The market risk premium is 7.2 percent, and T-bills are currently yielding 4.2 percent. The most recent dividend was $2.10 per share, and dividends are expected to grow at an annual rate of 5.2 percent, indefinitely. If the stock sells for $43 per share, what is your best estimate of the company's cost of equity?
Stock in Eduardo Industries has a beta of .92. The market risk premium is 7.2 percent, and T-bills are currently yielding 4.2 percent. The most recent dividend was $2.10 per share, and dividends are expected to grow at an annual rate of 5.2 percent, indefinitely. If the stock sells for $43 per share, what is your best estimate of the company's cost of equity?
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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pls need help answering in Excel.
![Problem 12-20 Calculating Cost of Equity [LO 1]
Stock in Eduardo Industries has a beta of .92. The market risk premium is 7.2 percent,
and T-bills are currently yielding 4.2 percent. The most recent dividend was $2.10 per
share, and dividends are expected to grow at an annual rate of 5.2 percent,
indefinitely. If the stock sells for $43 per share, what is your best estimate of the
company's cost of equity?
Note: Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.
Cost of equity
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F483c3d17-1621-47af-bfd2-86acecf64938%2Ff50c106e-dcc0-49d8-9acd-4f018120f531%2F8blxg9m_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 12-20 Calculating Cost of Equity [LO 1]
Stock in Eduardo Industries has a beta of .92. The market risk premium is 7.2 percent,
and T-bills are currently yielding 4.2 percent. The most recent dividend was $2.10 per
share, and dividends are expected to grow at an annual rate of 5.2 percent,
indefinitely. If the stock sells for $43 per share, what is your best estimate of the
company's cost of equity?
Note: Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.
Cost of equity
%
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