Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

To ini formimitait The future earnings, dividends, and comimen stock price of Collahan Technologies Inc, are expected to grow ghb per year. Callahan's common stock

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
To ini formimitait The future earnings, dividends, and comimen stock price of Collahan Technologies Inc, are expected to grow ghb per year. Callahan's common stock curtenty sells for 327.75 per shere: ite lest dividend was 32.50; and it will pay a 52.70 dividend at the end of the current yesr. e. Using the DCF npprobch, whet it its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. t. If the lam's bete in 1.4, the riek-free rate is 60., And the average return on the market is 12%, what will be the firm's cost of common equity Utind the CAPPy Approsch? Round your anewer to two decimal places. c. If the fimit bonde sem o return of 11%, based on the bond-yield-plus-risk-premium approach, what will be fo? Use the midpoint of the nsk. premikam renge discutsee in Section 20.5 in your calculotions. Round your answer to two decimal places. 4. 17 yeu heve eaviel comficence in the inguts used for the three approaches, what is your estimate of Caliahan's cost of common aquity? Do fiot. reunc intermediete calcul ntione. Round your answer to two decimal places. 13.50: bnd \&t nill nay a 32.70 divwend at the end of the currest yeat. he future earnings, dividends, and common stock price of Callahan Technologles Inc, are expected to grow 8\% per year. Callahan's common stock urrently selis for $27.75 per share; its last dividend was $2.50; and it will pay a $2.70 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal place % b. If the firm's bete is 1.4, the risk-free rate is 6%, and the average return on the market is 12%, 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 retum of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations, Round your answer to two decimal places. % 6. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? 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_2

Step: 3

blur-text-image_3

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

Project Finance In Theory And Practice

Authors: Stefano Gatti

3rd Edition

0128114010, 978-0128114018

More Books

Students also viewed these Finance questions

Question

Explain the various methods of job evaluation

Answered: 1 week ago

Question

Differentiate Personnel Management and Human Resource Management

Answered: 1 week ago

Question

Describe the functions of Human resource management

Answered: 1 week ago