Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Intro Longing Toys Inc. has just paid an annual dividend of $0.52 per share. Analysts expect the firm's dividends to grow by 8% forever. Its
Intro Longing Toys Inc. has just paid an annual dividend of $0.52 per share. Analysts expect the firm's dividends to grow by 8% forever. Its stock price is $36.5 and its beta is 1.1. The risk-free rate is 3% and the expected return on the market portfolio is 10%. Its bonds have a yield to maturity of 7%, and the risk-premium of Longing's stock over its bonds is 5%. Part 1 - Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the DCF approach? 3+ decimals Submit Part 2 | Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the CAPM? 3+ decimals Submit Part 3 | Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the bond yield plus risk premium approach? 3+ decimals Submit Part 4 |Attempt 1/3 for 10 pts. What is your best guess for the cost of equity from retained earnings , using the midpoint of the range? 3+ decimals Submit
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started