Question
2. ARRA industries stock has a beta of 1.25. The company just paid a dividend of $0.40 and the dividends are expected to grow at
2. ARRA industries stock has a beta of 1.25. The company just paid a dividend of $0.40 and the dividends are expected to grow at a 5% rate. The expected return on the market is 12%, and the risk free rate is 5.5%. The most recent stock price for ARRA industries is $72.
What is the cost of equity using:
(i) the DCF-based constant growth Gordon Model,
(ii) the beta-based CAPM model.
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Fundamentals Of Financial Management
Authors: James Van Horne, John Wachowicz
13th Revised Edition
978-0273713630, 273713639
