Question
1) Summerdahl Resort's common stock is currently trading at $20 a share. The stock is expected to pay a dividend of $1.25 a share at
1) Summerdahl Resort's common stock is currently trading at $20 a share. The stock is expected to pay a dividend of $1.25 a share at the end of the year (D1 = $1.25), and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? Round your answer to two decimal places.
%
2)
Booher Book Stores has a beta of 0.5. The yield on a 3-month T-bill is 5% and the yield on a 10-year T-bond is 6%. The market risk premium is 4.5%, and the return on an average stock in the market last year was 15%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.
%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started