1. EDM Inc. is a firm that is experiencing rapid growth. Lately, the firm paid a dividend of P5.90. You believe that dividends will grow at a rate of 19.0% per year for three years, and then at a rate of 7.0% per year thereafter. If you expect an annual rate of return of 12% on this investment and you plan to hold the stock indefinitely, that is the current price of the stock?
2. The earnings, dividends, and stock price of KS Company are expected to grow at 7% per year after this year. KS Companys common stock sells for P23 per share, its last dividend as P2.00 and the company pay P2.14 at the end of the current year. KS should pay P2.50 flotation cost. Using dividend growth model (Gordon Method), what is the expected cost of retained earnings for KS Company? What is the expected cost of issuing new common stock for KS Company?
3. If AAAM Companys beta is 75, the risk-free rate is 8%, and the average return on the market is 12%, what will be the firms cost of equity using CAPM approach?
4. NT Companys cost of capital with a capital structure of 2 debt-to-equity ratio, 8% cost of debt, 15% cost of equity, and 35% tax rate would be?