Question
Pollo Inc.'s 8.25% bonds have a YTM of 10.00%. The estimated risk premium between the company's bonds and stocks is 3%. Pollo's cost of common
Pollo Inc.'s 8.25% bonds have a YTM of 10.00%. The estimated risk premium between the company's bonds and stocks is 3%. Pollo's cost of common equity, Re, is ____%.
Marie Corp. has $1,200 in debt outstanding and $2,600 in common stock (and no preferred stock). Its marginal tax rate is 40%. Marie's bonds have a YTM of 5.50%. The current stock price (Po) is $46. Next year's dividend is expected to be $2.20, and it is expected to grow at a constant rate of 7% per year forever. The company's W.A.C.C. is ____%.
Jesse Corp.'s stock has a Beta of 0.95. The risk-free rate is 4%, and the expected market return is 13%. The firm's cost of common equity, Re, is _____%.
PeteCorps stock has a Beta of 1.00. Its dividend is expected to be $2.40. next year (D1), and will grow by 5% per year indefinitely. Assume the risk-free rate is 5%, and the Market Risk Premium is 8%. The stock price would currently be estimated to be $ _________.
[Note: (CAPM + Stock Valuation) You need to get expected return for this company's stock using CAPM, which will give you Re and then you can use it for stock valuation.]
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