Question
A company is trying to determine it's cost of equity using the Fama-French model. Details are below. The beta is 1.3. The risk free rate
A company is trying to determine it's cost of equity using the Fama-French model. Details are below.
The beta is 1.3.
The risk free rate is 2.00%.
The risk premium on the market is 5.50%.
The stock is expected to pay a dividend of $3.00 next year.
The stock is trading at $100 per share.
The return on equity is 12%.
The retention ratio is 80%.
The return for the Small sized portfolio minus the bid-sized portfolio is 3.00%.
The slope coefficient is .3.
The high book to market portfolio minus the low book to market value portfolio is -2.00%.
The factor weighting (slope) is .4.
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Small Business Management Launching and Growing New Ventures
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
6th Canadian edition
176532218, 978-0176532215
