Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please provide steps Floyd Industries stock has a beta of 1.15. The company just paid a dividend of $.75 and the dividends are expected to

please provide steps image text in transcribed
Floyd Industries stock has a beta of 1.15. The company just paid a dividend of $.75 and the dividends are expected to grow at 4.5 percent per year. The expected return on the market is 11 percent and Treasury bills are yielding 3.7 percent. The most recent stock price for the company is $84. Question 1. Calculate the cost of equity using the CAPM. (If you provided your answer and work in Excel, write down "See Excel" below.) Question 2. Assume that the company pays a 5 percent rate of interest on its debt (= cost of debt), its corporate tax rate is 21 percent, and its debt-to-equity ratio is 2. Calculate the WACC. Use the cost of equity you obtained from Question 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Financial Theory

Authors: Jean-Pierre Danthine, John B. Donaldson

2nd Edition

0123693802, 978-0123693808

More Books

Students also viewed these Finance questions