Question
QUESTION 20 The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock
QUESTION 20
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock sells for $30 per share, its last dividend was $3.00, and the company will pay a dividend of $3.21 at the end of the current year.
If the firms' beta is 1.3, the risk-free rate is 4%, and the expected return on the market is 10%, then what would be the firm's cost of equity based on the CAPM approach?
| a. | 0.118 | |
| b. | 0.214 | |
| c. | 0.105 | |
| d. | 0.155 |
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Personal Finance
Authors: Jeff Madura, Hardeep Singh Gill
3rd Canadian Edition
978-0133035575, 133035573, 978-0133970524, 133970523, 978-0134040042
