Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

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Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market price of $17.23 and a beta of .93. The return on the U.S. Treasury bill is 3.1 percent and the market risk premium is 7.6 percent. What is the cost of equity?

9.98 percent
10.04 percent
10.17 percent
10.30 percent
10.45 percent

business finance

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Answer 1

Answer #1

ER = Risk free rate + Beta * Market Risk Premium

= 3.1 + 0.93 * 7.6

= 3.1 + 7.07

ER = 10.17%

Cost of Equity = 10.17%

Option C is correct

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Answer 2

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