Cost of Equity The earnings, dividends, and stock price of Shelby Inc are expected to grow at 6 per year in the future Shelby's common stock sells for $23 50 per share, its last dividend was $2 50, and the company will pay a dividend of $2 65 at the end of the current year Using the discounted cash flow approach, what is its cost of equity Round your answer to two decimal places If the firm's beta is 0 8, the risk free rate is 8 , and the expected return on the market is 12 , then what would be the firm's cost of equity based on the CAPM approach Round your answer to two decimal places If the firm's bonds earn a return of 11 , then what would be your estimate of r s using the own bond yield plus judgmental risk premium approach ( Hint Use the mid point of the risk premium range ) Round your answer to two decimal places On the basis of the results of parts ac, what would be your estimate of Shelby's cost of equity Assume Shelby values each approach equally Round your answer to two decimal places O Cost of Equity The earnings, dividends, and stock price of Shelby Inc are expected to grow at 6 per year in the future Shelby's common stock sells for $23 50 per share, its last dividend was $2 50, and the company will pay a dividend of $2 65 at the end of the current year a Using the discounted cash flow approach, what is its cost of equity Round your answer to two decimal places b If the firm's beta is 0 8, the risk free rate is 8 , and the expected return on the market is 12 , then what would be the firm's cost of equity based on the CAPM approach Round your answer to two decimal places c If the firm's bonds earn a return of 11 , then what would be your estimate of rs using the own bond yield plus judgmental risk premium approach (Hint Use the mid point of the risk premium range ) Round your answer to two decimal places d On the basis of the results of parts c, what would be your estimate of Shelby's cost of equity Assume Shelby values each approach equally, Round your answer to two decimal places

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 16, 2024

Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby's common

Cost of Equity

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby's common stock sells for $23.50 per share, its last dividend was $2.50, and the company will pay a dividend of $2.65 at the end of the current year.

Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. %
If the firm's beta is 0.8, the risk-free rate is 8%, and the expected return on the market is 12%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. %
If the firm's bonds earn a return of 11%, then what would be your estimate of r_s using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. %
On the basis of the results of parts ac, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %

O Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 6% per year in the future. Shelby's common stock sells for $23.50 per share, its last dividend was $2.50, and the company will pay a dividend of $2.65 at the end of the current year. a. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. b. If the firm's beta is 0.8, the risk-free rate is 8%, and the expected return on the market is 12%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. c. If the firm's bonds earn a return of 11%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. d. On the basis of the results of parts -c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally, Round your answer to two decimal places. %