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you are the financial controller for EP Limited. You are thinking of taking the company public and listing on The Bahamas International Securities Exchange. You
you are the financial controller for EP Limited. You are thinking of taking the company public and listing on The Bahamas International Securities Exchange. You have determined that you require about $40 million for the IPO. = You retain an investment bank that provides you with the following information: Rf = 4% Rm 9.5% Beta for similar companies = 2.5 b. What is the required rate of return for EP Limited derived using the Capital Asset Pricing Model (CAPM)? Assume instead that EP Limited paid a dividend of $1.60 yesterday and expects dividends to grow by 9.5% in year 1, 8% in year 2 and then grow constantly at 4% into infinity. Using a required rate of return of 11%, what is the value of this company
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