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The future earnings, dividends, and common stock price of Blue Technologies Inc. are expected to grow 5.5% per year. Callahans common stock currently sells for
The future earnings, dividends, and common stock price of Blue Technologies Inc. are expected to grow 5.5% per year. Callahans common stock currently sells for $25.00 per share, its last dividend was $2.80, and it will pay a $3.15 dividend at the end of the current year.
a. Using the DCF approach, what is its cost of common equity?
b. If the firms beta is 1.25, the risk-free rate is 6.5%, and the average return on the market is 12%, what will be the firms cost of common equity using the CAPM approach?
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