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URGENT!!! EVS Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plusrisk-premium approach, and the DCF model. EVS expects next
URGENT!!!
EVS Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plusrisk-premium approach, and the DCF model. EVS expects next year's annual dividend, D1, to be $1.20 and it expects dividends to grow at a constant rate g= 3%. The firm's current common stock price, PO, is $20.00. The current risk-free rate, rRF,=5.0%; the market risk premium, RPM, =6.7%, and the firm's stock has a current beta, b,=1.30 Assume that the firm's cost of debt, rd, is 6.00%. The firm uses a 3.7% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using each of these three approaches? . a. Find cost of equity using CAPM approach. Provide calculations b. Find cost of equity uusing "Bond yield plus risk premium" approach. c. Find cost of equity using DCF approach. d. What is your best overall estimate of the firm's cost of equity
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