Swallow Industries has a beta of 1.60, a stock price of $17, and recently paid an annual dividend of $0.92 per share. The dividend growth rate is 2.2%. The market has a rate of return of 11.2%, and the risk-free rate is 3.9%. What is the company's cost of equity capital using the average return of the CAPM and the dividend-growth model?

Swallow Industries has a beta of 1.60, a stock price of $17, and recently paid an annual dividend of $0.92 per share. The dividend growth rate is 2.2%. The market has a rate of return of 11.2%, and the risk-free rate is 3.9%. What is the company's cost of equity capital using the average return of the CAPM and the dividend-growth model?

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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