Question
Mackenzie Company has a price of $31 and will issue a dividend of $2.00 next year. It has a beta of 1.6, the risk-free rate
Mackenzie Company has a price of $31 and will issue a dividend of $2.00 next year. It has a beta of 1.6, the risk-free rate is 5.2%, and the market risk premium is estimated to be 4.9%.
a. Estimate the equity cost of capital for Mackenzie.
b. Under the CDGM, at what rate do you need to expect Mackenzie's dividends to grow to get the same equity cost of capital as in part
(a)?
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
