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28 Sep 2019
The earnings, dividends, and common stock price of CarpettoTechnologies Inc. are expected to grow at 8% per year in thefuture. Carpetto's common stock sells for $27.75 per share, itslast dividend was $1.50, and it will pay a dividend of $1.62 at theend of the current year.
a. Using the DCF approach, what is its cost of common equity? Roundyour answer to two decimal places.
_____%
b. If the firm's beta is 0.60, the risk-free rate is 6%, and theaverage return on the market is 13%, what will be the firm's costof common equity using the CAPM approach? Round your answer to twodecimal places.
____ %
c. If the firm's bonds earn a return of 11%, what will rs be basedon the bond-yield-plus-risk-premium approach, using the midpoint ofthe risk premium range as suggested in studies? Round your answerto two decimal places.
____ %
d. Assuming you have equal confidence in the inputs used for thethree approaches, what is your estimate of Carpetto's cost ofcommon equity? Round your answer to two decimal places
____%
The earnings, dividends, and common stock price of CarpettoTechnologies Inc. are expected to grow at 8% per year in thefuture. Carpetto's common stock sells for $27.75 per share, itslast dividend was $1.50, and it will pay a dividend of $1.62 at theend of the current year.
a. Using the DCF approach, what is its cost of common equity? Roundyour answer to two decimal places.
_____%
b. If the firm's beta is 0.60, the risk-free rate is 6%, and theaverage return on the market is 13%, what will be the firm's costof common equity using the CAPM approach? Round your answer to twodecimal places.
____ %
c. If the firm's bonds earn a return of 11%, what will rs be basedon the bond-yield-plus-risk-premium approach, using the midpoint ofthe risk premium range as suggested in studies? Round your answerto two decimal places.
____ %
d. Assuming you have equal confidence in the inputs used for thethree approaches, what is your estimate of Carpetto's cost ofcommon equity? Round your answer to two decimal places
____%
a. Using the DCF approach, what is its cost of common equity? Roundyour answer to two decimal places.
_____%
b. If the firm's beta is 0.60, the risk-free rate is 6%, and theaverage return on the market is 13%, what will be the firm's costof common equity using the CAPM approach? Round your answer to twodecimal places.
____ %
c. If the firm's bonds earn a return of 11%, what will rs be basedon the bond-yield-plus-risk-premium approach, using the midpoint ofthe risk premium range as suggested in studies? Round your answerto two decimal places.
____ %
d. Assuming you have equal confidence in the inputs used for thethree approaches, what is your estimate of Carpetto's cost ofcommon equity? Round your answer to two decimal places
____%
Tod ThielLv2
30 Sep 2019
