Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common ktock cuirrently selis for

image text in transcribed
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 5% per year. Callahan's common ktock cuirrently selis for 527.00 per share; its last dividend was \$2.40; and it will pay a \$2.52 dividend at the end of the current year a. Using the DCF approach, what is iss cost of common equity? Do not round intermed ate calculations. Hound your arswer to two decimal places. % b. If the firm's beta is 1.9 , the nsk-free rate is 7%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CapM approach? Round your answer to two decimal places. c. If the firm's bonds earn a return of 11%, based on the bond-yield-plus.risk-premium acproach, what will be f, use the midpoint of the risk premium range discussed in. Section 10-5 in your caiculations, Alound your answer to two decimal places. d. If you have equal confidence in the inputs used for the three apgroachea, what is your estimate of Caliahan's cost of common equiy? Do not round intermediate calculations. Round your answer to two decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

Do you consider yourself introspective?

Answered: 1 week ago