Question
1.Summerdahl Resort's common stock is currently trading at $38.00 a share. The stock is expected to pay a dividend of $2.00 a share at the
1.Summerdahl Resort's common stock is currently trading at $38.00 a share. The stock is expected to pay a dividend of $2.00 a share at the end of the year (D1= $2.00), and the dividend is expected to grow at a constant rate of 4% a year. What is the cost of common equity? Round your answer to two decimal places.
%
2.Booher Book Stores has a beta of 0.9. The yield on a 3-month T-bill is 3.5% and the yield on a 10-year T-bond is 6.5%. The market risk premium is 5.5%, and the return on an average stock in the market last year was 12%. What is the estimated cost of common equity using the CAPM? Round your answer to two decimal places.
%
3.David Ortiz Motors has a target capital structure of 30% debt and 70% equity. The yield to maturity on the company's outstanding bonds is 11%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 10.47%. What is the company's cost of equity capital? Round your answer to two decimal places.
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