Q1:
capm cost of equity =risk free rate +beta*market risk premium
=4.9+1.2*6.2 =12.34%
Q2:
Bond yield plus risk premium =cost of debt +risk premium=7.68+4.2 =11.88%
Q3:
DCF cost of equity= D1/Po +gl
=(1.6/21) +.038 =11.41%
---- DCF cost of equity is considered best approach to calculate the cost of equity
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...