The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 7% per year. Callahan's common stock currently sells for $20.50 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the end of the current year.
a). Cost of common equity = [D1 / P0] + g
= [$2.14 / $20.50] + 0.07 = 0.1044 + 0.07 = 0.1744, or 17.44%
b). Cost of common equity = Risk-free Rate + [Beta * (Market Return - Risk-free Rate)]
= 8% + [1.6 * (12% - 8%)]
= 8% + [1.6 * 4%] = 8% + 6.4% = 14.4%
c). Let's assume range of risk premium is 3% to 5%
So, Average Risk Premium = [3% + 5%] / 2 = 8% / 2 = 4%
Cost of common equity = Bond Yield + Average Risk Premium = 11% + 5% = 16%
d). Cost of common equity = [17.44% + 14.4% + 16%] / 3 = 47.84% / 3 = 15.95%
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $27.75 per share; its last dividend was $2.50; and it will pay a $2.60 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. b. If the firm's beta is 1.8, the risk-free...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $22.50 per share; its last dividend was $1.50; and it will pay a $1.56 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 2.1, the risk-free rate...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $27.50 per share; its last dividend was $1.60; and it will pay a $1.68 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. b. If the firm's beta is 1.8, the risk-free...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8% per year. Callahan's common stock currently sells for $24.00 per share; its last dividend was $2.50; and it will pay a $2.70 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. b. If the firm's beta is 0.7, the risk-free...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common stock currently sells for $25.50 per share; its last dividend was $2.40; and it will pay a $2.52 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 1.1, the risk-free rate...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 3% per year. Callahan's common stock currently sells for $23.75 per share; its last dividend was $2.00; and it will pay a $2.06 dividend at the end of the current year. 1. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. 2. If the firm's beta is 0.8, the risk-free...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $23.75 per share; its last dividend was $2.50; and it will pay a $2.65 dividend at the end of the current year. 3. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. b. If the firm's beta is 1.90, the...
COST OF COMMON EQUITY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $29.50 per share; its last dividend was $1.50; and it will pay a $1.56 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. If the firm's beta is...
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $29.25 per share; its last dividend was $2.50; and it will pay a $2.60 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % If the firm's beta is 1.1, the risk-free rate...
Cost of Common Equity The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 4% per year. Callahan's common stock currently sells for $21.00 per share; its last dividend was $2.50; and it will pay a $2.60 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations. % If the firm's beta...