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Question No3-4.plz 3 (10%) Stock in ABC has a beta of 0.85. The market risk premiumis 8%, and T-bills are currently yielding 5%. The company's
Question No3-4.plz
3 (10%) Stock in ABC has a beta of 0.85. The market risk premiumis 8%, and T-bills are currently yielding 5%. The company's most recent dividend is $1.60 per share, and dividends are expected to grow at a 6% annual rte indefinitely. If the stock sells for S37 per share, a) What is the estimate of the company's cost of equity using CAPM? b) What is the estimate of the company's cost of equity using the dividend discount model? 4. (10%) EFG Company issue a 30-year, 7% semiannual bond 7 years ago. The bond currently sells for 108% of its face value: $1,000. The company's tax rate is 35% a) What is EFG Company's pre-tax cost of debt? b) What is the after-tax cost of debtStep by Step Solution
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