Part 1

Company Douglas LTD paid dividend of $5.20 for 7 years and then stopped for good. The companys cost of capital is based on the following information

Valuation of share when a company pays Dividend for a

while and stops after

Real Rate or Real GDP

1.4%

CPU for last year

7950

Current CPU

8240

Risk Premium

2%

REQUIRED

1. Calculate the risk free rate

2. Calculte the Vo of the company