5.a

b.

c.

d.

Fade Ltd's equity beta is 1.25, its common stock just paid a dividend of $0.40/share. The risk-free rate is 1.86%. The current market risk premium is 5.12%. The stock's dividend rate is expected to grow at some constant rate g=0.05. Assuming you believe in the CAPM model, what is your best estimate of share price today? 11.43 12.27 12.88 13.35 The shares of Tission Records of Jamaica is selling at $43.75 share in early January 2020. They will pay a dividend in late 2020 of $1.87. The dividend is expected to grow at a constant rate after 2020. If investor's require a 10% return, what is Tission's expected (g) rate of growth? 4.27% 5.73% 10.00% Do not have enough information to determine. Studies of the performance of professionally managed mutual funds find that these funds, on average: Do not outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the strong form of the efficient market hypothesis. Do not outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis. Outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding refutes the strong form of the efficient market hypothesis. Outperform a market index. Assuming mutual fund managers rely primarily on public information, this finding supports the semistrong form of the efficient market hypothesis. You will use the following information to answer 4 different questions (I will repeat it again but it is the same information). The company faces a tax rate of 40%. The company has 100,000 shares common stock. The common stock has a price of $28. You estimate that the beta of the common stock is 1.5. The expected market return is 10%, and the risk-free rate is 5%. You decide to employ the CAPM approach to calculate the cost of equity. The company has one debt issues outstanding. The issue consists of 1,000 semi-annual coupon bonds. Each bond has a face value of $1000. The annual coupon rate is 10%, and each bond has a market price of $885.30. The bonds will mature 10 years from now and the next coupon will be paid in 6 months. Using the information provided above, calculate the cost of equity of the company. 5.00% 7.50% 12.50% 20.00%