Problem 12-1 Calculating Cost of Equity [LO 1]

The Lo Tech Co. just issued a dividend of $2.40 per share on its common stock. The company is expected to maintain a constant 8 percent growth rate in its dividends indefinitely.

Required:

If the stock sells for $43.20 a share, what is the companys cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

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Problem 12-3 Calculating Cost of Equity [LO 1]

Stock in CDB Industries has a beta of 1.14. The market risk premium is 7.4 percent, and T-bills are currently yielding 4.4 percent. CDBs most recent dividend was $3.80 per share, and dividends are expected to grow at a 5.4 percent annual rate indefinitely.

Required:

If the stock sells for $60 per share, what is your best estimate of CDBs cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

cost of equity .........%

Problem 12-5 Calculating Cost of Preferred Stock [LO 1]

Sixth Fourth Bank has an issue of preferred stock with a $6.10 stated dividend that just sold for $123 per share.

Required:

What is the banks cost of preferred stock? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Cost of preferred stock

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