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Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.5%, and the current dividend yield is 8.50%. Its beta is 1.33, the market risk premium is 14.50%, and the risk-free rate is 2.70%.
a. Use the CAPM to estimate the firms cost of equity
Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
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