Stock X which is selling at $45 per share has beta of 1.25. Market risk premium is 6.5%. The yield of the T-bills is 5.0%. Market return is 11.5%. The company just paid the dividends of $200,000. The number of shares outstanding is 80,000. Dividends grow at 3% per year constantly. What is the best estimate of the cost of equity of stock X. 10.92% 7.80% 8.72% 13.13%

Stock X which is selling at $45 per share has beta of 1.25. Market risk premium is 6.5%. The yield of the T-bills is 5.0%. Market return is 11.5%. The company just paid the dividends of $200,000. The number of shares outstanding is 80,000. Dividends grow at 3% per year constantly. What is the best estimate of the cost of equity of stock X. 10.92% 7.80% 8.72% 13.13%

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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Saved Help Stock in Eduardo Industries has a beta of 1.14. The market risk premium is 7.4 percent, and T-bills are currently yielding 4.4 percent. The most recent dividend was $3.80 per share, and dividends are expected to grow at an annual rate of 5.4 percent, indefinitely. If the stock sells for $60 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 %
Handy Handbags (HH) recently paid a dividend of $2.00 (D0), which is expected to grow at 7%. HH’s stock price is $23, its beta is 1.6, the yield on its bonds is 12%, and the risk premium on the company’s own stock is 5%. The risk-free rate is 6% and the market risk premium is 4%. Flotation costs will be 10% if Handy issues new common stock. Using the bond yield plus risk premium method, compute the cost of retained earnings for HH: Question 14 options: 19% 16% 11% 17%
Driver Products recently paid its annual dividend of $2, and reported an ROE of 15%. The firm pays out 50% of its earnings as dividends. The stock has a beta of 1.44. The current risk-free rate is 2.5% and the market return is 11%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Pi, Inc. just payed a $2.35 per share dividend yesterday (that is D0). The dividend is expected to grow at a constant rate of 6% a year. The required rate of return on the stick, rs is 19%. What is the stock’s current value per share?
A common stock is expected that the earnings and dividends will grow at a rate of 25% for the next 4 years, after the growth rate in earnings and dividends will fall to zero, i.e., g = 0. The company’s last dividend, D0, was ₱1.25, its beta is 1.20, the market risk premium is 5.50%, and the risk-free rate is 3.00%. What is the current price of the common stock?
1. A company just paid dividends of $2.75 per share. The company has a constant growth of 5.5%. The risk free rate is 2.5%, beta is 0.90 and market return of 8%. The stock is selling at $75.50. 1. Determine the rate of return on equity. 2. What is the stock price after a year?
Tyres Limited has asked you to calculate the return on its ordinary shares to help in its calculation of its weighted average cost of capital (WACC). Tyres has 10,000,000 ordinary shares on issue that have a beta of 1.63. The last dividend was $9.56, and dividends have been growing at 2.7% per year. If the risk-free rate is 1.98% and the return on the market is 9.1%. What is the required return on one of Tyres’s ordinary shares?.
Stock in Daenerys Industries has a beta of 1.02. The market risk premium is 8 percent, and T-bills are currently yielding 5.5 percent. The company's most recent dividend was $2 per share, and dividends are expected to grow at a 6 percent annual rate indefinitely. If the stock sells for $32 per share, what is your best estimate of the company's cost of equity? Multiple Choice 8.05% 13.66% 13.14% 10.54% O 12.63%
Handy Handbags (HH) recently paid a dividend of $2.00 (D0), which is expected to grow at 7%. HH’s stock price is $23, its beta is 1.6, the yield on its bonds is 12%, and the risk premium on the company’s own stock is 5%. The risk-free rate is 6% and the market risk premium is 4%. Flotation costs will be 10% if Handy issues new common stock. Using the discounted cash flow method, compute the cost of retained earnings for HH: Question 13 options: 13.3% 18.4% 16.3% 15.7%
AAA's stock has a required rate of return = 11.50%. It is selling for $25/ share. It's dividend will grow at a constant rate of 7.00%. How much is the last dividend, D0? $0.95 $1.05 $1.16 $1.27
A stock is selling for $80 in the market. The company’s beta is 1.5, the market risk premium (rM - rF) is 6%, and the risk-free rate is 2%. The most recent dividend paid is D0 = $2 and dividends are expected to grow at a constant rate g. What’s the dividend growth rate g for this stock? find the stock’s capital gain yield. 8.29% 4.19% 7.68% 7.81%
The High Flying Company just paid a dividend of $1.50 per share. The dividends are expected to grow at the rate of 20% per year for 3 years, then by 15% per year for 3 more years, before finally settling down to the industry average growth rate of 8.5%. If the risk-adjusted required rate of return on this stock is 16%, the stock's intrinsic value is: Multiple Choice $33.12 $35.00 $50 $16.90

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