a)
Growth Rate = g = 6%
Current Price = p = 23.75
Dividend 1 = D1 = Next Dividend = 2.65
Cost of Equity = r = ?
P = D1 / (r -g)
23.75 = 2.65 / (r - 0.06)
r - 0.06 = 2.65 / 23.75 = 0.1116
r = 0.1116 + 0.06 = 17.16%
b)
Beta = b = 1.90
Risk Free = rf = 4%
Return on Market = rm = 12%
Return on Equity = re = ?
re = rf + b (rm - rf) = 4% + 1.9 (12 - 4) = 19.2%
c) some information is missing for c so I couldn't answer as Section 10 - 5 is missing.
I would request you to repost question c and d including the answer of a and b given above and section 10 -5 so that c can be answered and based on a b and c d can be answered.
Hope this helps. Thanks and have a good day
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