#4

The Harrison Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM methad for estimating a company's: 4.95%. Bssed on the bond-yield-plus-risk-premium approach, Harrison's cost of internal equity is: 16.75% 14,479 15.23% 18.28% The cost of equity using the discounted cash flow (or dividend growth) approach Ford Enterprives's stock is currently selling for $32.45 per shere, and the firm expects its per-share dividend to be $1.38 in one year: Analysts project the firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the ciscounted cash flow (or dividend growth) approach, what is Fordis cost of interinal equity? 9.97% 0.474 10.47W 1246% Estimating growth rates It is often difficuit to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three avalibble methods to generate such an estimate: - Carry forward a historical realued growth rate, and apply it to the future, - Locate and apply an expected future growth rate prepared and published by security analysts. - Use the retenton growh model. Suppose Ford is currenty distribuing 40 w of its earnings in the form of cash dividends. It has also historically generated an average return on equity (hOC) of 24%. Ford's estimated gronth rate is The Harrison Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM methad for estimating a company's: 4.95%. Bssed on the bond-yield-plus-risk-premium approach, Harrison's cost of internal equity is: 16.75% 14,479 15.23% 18.28% The cost of equity using the discounted cash flow (or dividend growth) approach Ford Enterprives's stock is currently selling for $32.45 per shere, and the firm expects its per-share dividend to be $1.38 in one year: Analysts project the firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the ciscounted cash flow (or dividend growth) approach, what is Fordis cost of interinal equity? 9.97% 0.474 10.47W 1246% Estimating growth rates It is often difficuit to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three avalibble methods to generate such an estimate: - Carry forward a historical realued growth rate, and apply it to the future, - Locate and apply an expected future growth rate prepared and published by security analysts. - Use the retenton growh model. Suppose Ford is currenty distribuing 40 w of its earnings in the form of cash dividends. It has also historically generated an average return on equity (hOC) of 24%. Ford's estimated gronth rate is