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The stock of Geo Company sells for $42.50, most recent dividend was $1.25. A flotation cost of 10% would be required to issue new common
The stock of Geo Company sells for $42.50, most recent dividend was $1.25. A flotation cost of 10% would be required to issue new common stock. Security analysts are projecting that the common dividend will grow at a rate of 7% a year. The yield on 10 year Govt. bond is 4.00% and 3-month T-bill is 2.00%. The beta for Geo's stock is 1.40 and the expected stock market return is 10.00%. The appropriate bond risk premium is 3.0% for the bond-yield-plus risk premium approach What is Geo's cost of equity from retained earnings using the CAPM approach? (Calculate up to two decimal places, enter answer without percentage sign e.g. 5.10)
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