P14-3 Calculating Cost of Equity [LO1] Stock in Country Road Industries has a be
ID: 2706914 • Letter: P
Question
P14-3 Calculating Cost of Equity [LO1]
Stock in Country Road Industries has a beta of .85. The market risk premium is 8 percent, and T-bills are currently yielding 5 percent. The company's most recent dividend was $1.60 per share, and dividends are expected to grow at a 6 percent annual rate indefinitely. If the stock sells for $37 per share, your best estimate of Country Road's cost of equity is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Stock in Country Road Industries has a beta of .85. The market risk premium is 8 percent, and T-bills are currently yielding 5 percent. The company's most recent dividend was $1.60 per share, and dividends are expected to grow at a 6 percent annual rate indefinitely. If the stock sells for $37 per share, your best estimate of Country Road's cost of equity is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Hi,
Please find the answer as follows:
Cost of Equity = 1.60*(1+.06)/37 + .06 = 10.58%
Answer is 10.58%
Thanks.
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