Question
1. Reddick Enterprises' stock currently sells for $50.00 per share. The dividend is projected to increase at a constant rate of 5.50% per year. The
1. Reddick Enterprises' stock currently sells for $50.00 per share. The dividend is projected to increase at a constant rate of 5.50% per year. The required rate of return on the stock, rs, is 9.00%. What is the stock's expected price 3 years from today?
2. Butcher Timber Company hired your consulting firm to help them estimate the cost of equity. The yield on the firm's bonds is 12.00%, and your firm's economists believe that the cost of equity can be estimated using a risk premium of 3.85% over a firm's own cost of debt. What is an estimate of the firm's cost of equity from retained earnings?
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