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PLEASE ANSWER ASAP 1. The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahans common
PLEASE ANSWER ASAP
1. The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahans common stock currently sells for $22.00 per share; its last dividend was $2.00; and it will pay a $2.12 dividend at the end of the current year.
a. Using the DCF approach, what is its cost of common equity?
b. If the firms bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in class slides in your calculations.
c. If you have equal confidence in the inputs used for the two approaches, what is your estimate of Callahans cost of common equity?
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