Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The earnings, dividends, and stock price of Yoyo Inc. are expected to grow at 8% per year in the future. Yoyo's common stock sells for
The earnings, dividends, and stock price of Yoyo Inc. are expected to grow at 8% per year in the future. Yoyo's common stock sells for $25 per share, its last dividend was $2.00, and the company will pay a dividend of $2.10 at the end of the end of the current year.
a. using the discounted cash flow approach, what is its cost of equity?
b. If the firm's beta is 1.3, the risk-free rate is 5%, and the expected return on the market is 9%, then what would be the firm's cost of equity based on the CAPM approach?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started