cost of equity using CAPM formula will be
=rf+beta*RPm=
4.9%+1.2*6.2%=12.34% (answer)
Bond yield plus risk premium based cost of equity will be
=cost of debt+risk premium
=7.68%+4.2%=11.88%(answer)
DCF method based cost of equity will be=(1.60/21)+3.8%=11.42%
best estimate of firm's cost of equity
=(cost of equity using CAPM formula+Bond yield plus risk premium based cost of equity+DCF method based cost of equity)/3
=(12.34%+11.88%+11.42%)/3=11.88%
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, Dı, to be $1.60 and it expects dividends to grow at a constant rate gu = 3.8%. The firm's current common stock price, Po, is $21.00. The current risk-free rate, rRF, = 4.9%; the market risk premium, RPM, = 6.2%, and the firm's stock has a current beta, b, = 1.2....
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, Dı, to be $1.60 and it expects dividends to grow at a constant rate gu = 3.8%. The firm's current common stock price, Po, is $21.00. The current risk-free rate, rRF, = 4.9%; the market risk premium, RPM, = 6.2%, and the firm's stock has a current beta, b, = 1.2....
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, Dı, to be $1.60 and it expects dividends to grow at a constant rate gu = 3.8%. The firm's current common stock price, Po, is $21.00. The current risk-free rate, rRF, = 4.9%; the market risk premium, RPM, = 6.2%, and the firm's stock has a current beta, b, = 1.2....
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 g = 3.5%. The firm's current common stock price, P0, is $22.00. The current risk-free rate, rRF, = 4.6%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, = 1.3....
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 $2.40 and it expects dividends to grow at a constant rate g = 5.6%. The firm's current common stock price, P0, is $27.00. The current risk-free rate, rRF, = 4.8%; the market risk premium, RPM, = 6.1%, and the firm's stock has a current beta, b, = 1.3....
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 $2.10 and it expects dividends to grow at a constant rate g = 5.0%. The firm's current common stock price, P0, is $20.00. The current risk-free rate, rRF, = 4.2%; the market risk premium, RPM, = 5.9%, and the firm's stock has a current beta, b, = 1.30....
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 $1.90 and it expects dividends to grow at a constant rate g = 3.6%. The firm's current common stock price, P0, is $25.00. The current risk-free rate, rRF, = 4.9%; the market risk premium, RPM, = 6.5%, and the firm's stock has a current beta, b, = 1.35....
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...
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 $2.10 and it expects dividends to grow at a constant rate gu = 4,3%. The firm's current common stock price, Po, is $22.00. The current risk-free rate, RF, = 4.9%; the market risk premium, RPM, 6.2%, and the firm's stock has a current beta, b, - 1. Assume...
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 $1.50 and it expects dividends to grow at a constant rate g = 4.8%. The firm's current common stock price, Po, is $25.00. The current risk-free rate, rRF, = 4.2%; the market risk premium, RPM, = 5.8%, and the firm's stock has a current beta, b, 1.10. Assume...