Using the Yahoo! Finance Web site (http://quote.yahoo.com) get the current price and five-year dividend history for PPG Industries, Inc. (NYSE: PPG). Use the same procedure as in the Internet Exercise of Chapter 8 to gather this data. In addition, get the beta for PPG from its profile page on Yahoo! Finance, and the five-year U.S. Treasury yield (ticker: ^FVX). Note that you will need to divide the index value by 10 to get the yield.

a. Calculate the annualized dividend growth rate from the fiveyear dividend history using the same procedure as in Chapter 8.

b. Using the stockís current price, dividend, and growth rate calculate the cost of retained earnings for PPG.

c. Assuming that the average market return over the next five years will be 12%, calculate the cost of retained earnings using the CAPM. Use the actual beta and five-year Treasury yield (risk-free rate) in the model.

d. To get your final estimate of the cost of retained earnings, simply average the results from parts b and

c. L01