Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have

Question:

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 30%, and the current yield is 2%. Its beta is 1.2, the market risk premium is 8%, and the risk-free rate is 4%.
a. Calculate two estimates of the firm's cost of equity.
b. Which estimate seems more reasonable to you? Why?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...