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4. The equity of Paprika Developments has a beta of 0.8. The earnings of Paprika are expected to grow at 8% indefinitely. Paprika maintains a
4.
The equity of Paprika Developments has a beta of 0.8. The earnings of Paprika are expected to grow at 8% indefinitely. Paprika maintains a constant payout ratio. The risk-free rate is 3.5% and the expected return on the market is 9%. Its last dividend was $0.25 cents per share and a share is currently selling for $4.40. Calculate the cost of equity using the CAPM.
A.
7.90%
B.
10.70%
C.
13.68%
D.
14.14%
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