Although it is a subjective measure, analysts often estimate the cost of common equity by adding...
Although it is a subjective measure, analysts often estimate the cost of common equity by adding a risk premium a risk premium of 3 to 5 percentage points to the? and why is that the correct answer?
The Growth rate of the firm
interest rate of the firm's long term debt
the market return
the risk free rate
Homework Answers
While calculating the cost of equity, the formula is as follows:
Cost of equity= Risk free rate+risk premium
It is used to know the individual that can bear a risky asset in comparison to risk free asset.
So correct answer is risk free rate
Add Answer to:
Although it is a subjective measure, analysts often estimate the
cost of common equity by adding...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for...
(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for the Hetterbrand Corporation sells for $59.82, and the last dividend paid was $2.23. Five years ago the firm paid $1.93 per share, and dividends are expected to grow at the same annual rate in the future as they did over the past five years. a. What is the estimated cost of common equity to the firm using the dividend growth model? b. Hetterbrand's...
(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for the...
(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for the Hetterbrand Corporation sells for $60.09, and the last dividend paid was $2.21. Five years ago the firm paid $1.83 per share, and dividends are expected to grow at the same annual rate in the future as they did over the past five years. a. What is the estimated cost of common equity to the firm using the dividend growth model? b. Hetterbrand's CFO has...
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is...
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while the market risk premium is 6.63%. The Jefferson Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Jefferson's cost of equity is 11.3085% The cost of equity using the bond yield plus risk premium approad 10.779 11.847% The Harrison Company is dosely held and, therefore, cannot generate relis cost of internal equity. Harrison's bonds yield 11.52%, and...
10.4 Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the...
10.4
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, Di, to be $2.40 and it expects dividends to grow at a constant rate g = 3.2%. The firm's current common stock price, Po, is $25.00. The current risk-free rate, RF, = 4.7%; the market risk premium, RPM, = 6.1%, and the firm's stock has a current beta, b, =...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is 4.23%, while the market risk premium is 6.63%, the Burris Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach The Lincoln Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's...
Help with #12? 260 Part 3: Planning for the Future investors' target rate 10. (Cost of...
Help with #12?
260 Part 3: Planning for the Future investors' target rate 10. (Cost of Equity Capital) Use the following information to estimate the VentureBanc investors'tar of return: RETURN COMPONENT RATE COMPONENT 5% Liquidity premium Risk-free rate Advisory premium Market risk premium Hubris projection premium 6% 99 7.5% 15% A. VentureBanc uses a systematic risk measure of 2.0. Based on the information shown estimate VentureBanc's investment risk premium. Then estimate the cost of equity capital for VentureBanc. B. Determine...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.70 and it expects dividends to grow at a constant rate gl = 5.6%. The firm's current common stock price, Po, is $26.00. The current risk- free rate, RF, = 4.6%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, =...
XYZ common stock recently paid annual dividend in the amount of $1.75 per share. The analysts estimate of the firm's gr...
XYZ common stock recently paid annual dividend in the amount of $1.75 per share. The analysts estimate of the firm's growth forecast over the next 6 years is 15%. You expect the firm to slow down in the long run and estimate the long-term growth rate after 6 years to be 8%. If the required rate of return on the stock is 10%, what is your estimate of the stock price?
10. Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the...
10.
Barton Industries estimates its cost of common equity by using
three approaches: the CAPM, the bond-yield-plus-risk-premium
approach, and the DCF model. Barton expects next year's annual
dividend, D1, to be $2.40 and it expects dividends to
grow at a constant rate gL = 5.7%. The firm's current
common stock price, P0, is $23.00. The current risk-free
rate, rRF, = 4.7%; the market risk premium,
RPM, = 6%, and the firm's stock has a current beta, b, =
1. Assume...
The CPM estimate or rs is equal to the risk free rate, Tre, plus a nisk premium that is equal to the nsk premium on an average stock, (M ), scarea up or down to reflect the particular stock's risk as measured by its beta coefficient, b. This model assumes that a firm's stockholders are Select diversified, but if they are Select diversified, then the firm's true investment risk would not be measured by Select and the CAPM estimate would...
(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for the Hetterbrand Corporation sells for $60.09, and the last dividend paid was $2.21. Five years ago the firm paid $1.83 per share, and dividends are expected to grow at the same annual rate in the future as they did over the past five years. a. What is the estimated cost of common equity to the firm using the dividend growth model? b. Hetterbrand's CFO has...
The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while the market risk premium is 6.63%. The Jefferson Company has a beta of 0.92. Using the capital asset pricing model (CAPM) approach, Jefferson's cost of equity is 11.3085% The cost of equity using the bond yield plus risk premium approad 10.779 11.847% The Harrison Company is dosely held and, therefore, cannot generate relis cost of internal equity. Harrison's bonds yield 11.52%, and...
10.4
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, Di, to be $2.40 and it expects dividends to grow at a constant rate g = 3.2%. The firm's current common stock price, Po, is $25.00. The current risk-free rate, RF, = 4.7%; the market risk premium, RPM, = 6.1%, and the firm's stock has a current beta, b, =...
The cost of equity using the CAPM approach The current risk-free rate of return (RF) is 4.23%, while the market risk premium is 6.63%, the Burris Company has a beta of 0.92. Using the Capital Asset Pricing Model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach The Lincoln Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's...
Help with #12?
260 Part 3: Planning for the Future investors' target rate 10. (Cost of Equity Capital) Use the following information to estimate the VentureBanc investors'tar of return: RETURN COMPONENT RATE COMPONENT 5% Liquidity premium Risk-free rate Advisory premium Market risk premium Hubris projection premium 6% 99 7.5% 15% A. VentureBanc uses a systematic risk measure of 2.0. Based on the information shown estimate VentureBanc's investment risk premium. Then estimate the cost of equity capital for VentureBanc. B. Determine...
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $1.70 and it expects dividends to grow at a constant rate gl = 5.6%. The firm's current common stock price, Po, is $26.00. The current risk- free rate, RF, = 4.6%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, =...
XYZ common stock recently paid annual dividend in the amount of $1.75 per share. The analysts estimate of the firm's growth forecast over the next 6 years is 15%. You expect the firm to slow down in the long run and estimate the long-term growth rate after 6 years to be 8%. If the required rate of return on the stock is 10%, what is your estimate of the stock price?
10.
Barton Industries estimates its cost of common equity by using
three approaches: the CAPM, the bond-yield-plus-risk-premium
approach, and the DCF model. Barton expects next year's annual
dividend, D1, to be $2.40 and it expects dividends to
grow at a constant rate gL = 5.7%. The firm's current
common stock price, P0, is $23.00. The current risk-free
rate, rRF, = 4.7%; the market risk premium,
RPM, = 6%, and the firm's stock has a current beta, b, =
1. Assume...
Most questions answered within 3 hours.
-
These multiple choice question, so you just need to write answer
1,2,3 or 4. But please...
asked 36 seconds ago -
Given the hall coefficient find the fermi velocity
given the hall coefficient Rh = E(y)/(J(x) B)...
asked 8 minutes ago -
Two newly discovered planets follow circular orbits around a
star in a distant part of the...
asked 9 minutes ago -
Consider the version of the product mix problem discussed in
class. But the recipe for the...
asked 9 minutes ago -
Write a program that finds the largest and smallest of four
integers entered by user. Enter...
asked 22 minutes ago -
A 34.22 g sample of copper (s = 0.385 J/g°C) was cooled from
78.8 °C to...
asked 25 minutes ago -
how many
milliliters of 12.0 M HCl are needed to prepare 875.0 ml of 1.00 M...
asked 39 minutes ago -
What were the major components and goals of the
Welfare Reform Act of 1996? Did the...
asked 49 minutes ago -
if the number of radioactive atoms at time t is 2x10^6, and
2x10^4 atoms disintegrate in...
asked 51 minutes ago -
Sheffield Corp. is preparing its direct labor budget for May.
Projections for the month are that...
asked 56 minutes ago -
Find the required angular acceleration of an ultracentrifuge for
the centripetal acceleration of a point 2.50...
asked 1 hour ago -
In C++
Do not use classes. Write a function
to add two integers of any length,...
asked 1 hour ago