Question
A. The current risk-free rate of return (rRFrRF) is 4.67% while the market risk premium is 5.75%. The Jefferson Company has a beta of 0.78.
A. The current risk-free rate of return (rRFrRF) is 4.67% while the market risk premium is 5.75%. The Jefferson Company has a beta of 0.78. Using the capital asset pricing model (CAPM) approach, Jeffersons cost of equity is Options: 9.16, 8.224, 9.618, 10.076 B. The Jackson Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a companys cost of internal equity. Jacksons bonds yield 10.28%, and the firms analysts estimate that the firms risk premium on its stock over its bonds is 3.55%. Based on the bond-yield-plus-risk-premium approach, Jacksons cost of internal equity is: Options: 16.60, 13.83, 13.14, 15.21 c. Kirby Enterprisess stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project the firms growth rate to be constant at 5.72%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Kirbys cost of internal equity? Options: 13.61, 12.31, 12.96, 16.20 D. Suppose Kirby is currently distributing 60% of its earnings in the form of cash dividends. It has also historically generated an average return on equity (ROE) of 18%. Kirbys estimated growth rate is Options: 58.00, 18.40, 17.60, 7.2 e. If a firm cannot invest retained earnings to earn a rate of return ____ the required rate of return on retained earnings, it should return those funds to its stockholders. Option: greater than or equal to, less than
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