Cost of common equity-use the midpoint of risk premium range

Assignment Help Financial Management
Reference no: EM131059655

Cost of Common Equity

The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 6% per year. Carpetto's common stock currently sells for $21.00 per share; its last dividend was $2.50; and it will pay a $2.65 dividend at the end of the current year. answer in percentage

Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places.

%

If the firm's beta is 1.00, the risk-free rate is 7%, and the average return on the market is 14%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places.

%

If the firm's bonds earn a return of 8%, 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.

%

If you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity? Round your answer to two decimal places.

%

Reference no: EM131059655

Questions Cloud

Draw the corresponding ladder logic diagram : Electronics Systems Engineering Assignment. Draw the corresponding Ladder Logic Diagram for the OMRON CP1L- M30DT PLC (the PLC that we have in our lab). You are required to use valid addresses
Linear speed with which the bucket : The crank handle moves with a constant tangential speed of 1.20 m/s on its circular path. The rope holding the bucket unwinds without slipping on the barrel of the crank. Find the linear speed with which the bucket moves down the well.
Both projects require an annual return : NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. To be prudent, you compute the NPV for both projects. Which projec..
Important to the measurement of financial value : Why is the time value of money concept so important to the measurement of financial value? Specifically explain or illustrate how this critical concept is used to aid in measuring financial value. There is an inherent opportunity cost contained in ev..
Cost of common equity-use the midpoint of risk premium range : The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 6% per year. Carpetto's common stock currently sells for $21.00 per share; Using the DCF approach, what is its cost of common equity? If the fir..
Engine power is required for this take off : A fully loaded Boeing 767 jetliner has a mass of 180,000 kg. Starting from rest, it accelerated down the runway and reaches a takeoff speed of 270 km/h in 35 seconds. What engine power is required for this take off?
Explain each step and key variables used to determine result : Using the five-step decision making approach, outline your evaluation of this scenario and which decision should be taken for the company and why.
New moment of inertia of the person : a) Calculate the new moment of inertia of the person. b) If angular momentum is conserved, what is the angular velocity of the person-carousel system once the person reaches the edge?
Used as the initial cash flow for this building project : Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $570,000. The lot was recently appraised at $607,000. The company now wants to build a new retail store on the site. The building cost is estimated at $1,220,000. What ..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Should the company buy and install the machine press

Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $430,000 is estimated to result in $170,000 in annual pretax cost savings. Should the company buy and install the machine pre..

  Use nonconvertible preferred stock extensively

_____use nonconvertible preferred stock extensively as a means of long-term financing.

  What is the convexity measure for this bond

Consider a 4% coupon 30-year option-free bond selling at 72.3244 and yielding 6%. If the yield is decreased by 20 basis points, the price would increase to 74.5492. If the yield increases by 20 basis points, the price would decrease to 70.1988.  Calc..

  Accompanied by issues of cost-safety-benefit and risk

Technology diffusion has been accompanied by issues of cost, safety, benefit, and risk. Federal legislation has aimed at addressing these concerns. Which do you consider to be the most important area for focus?

  Depreciated straight-line to zero over four-year tax life

The Market Place is considering a new four-year expansion project that requires an initial fixed asset investment of $2.8 million. The fixed asset will be depreciated straight-line to zero over its four-year tax life, after which time it will have a ..

  Explain the concept of triple bottom line principles

The incorporation of triple bottom line principles in work planning is a move many organisations have made. Explain the concept of triple bottom line principles.

  What is the yield to call of the bond

A 5.10 percent coupon bond with 15 years left to maturity can be called in three years. The call premium is one year of coupon payments. It is offered for sale at $1,060.30. What is the yield to call of the bond?

  Financial management and markets

Issue new stock, then use some of the proceeds to purchase additional inventory and hold the remainder as cash.

  Issue more shares and use the proceeds to lower its debt

Select the choice below that will make the quick ratio go up: Firm XYZ will issue more shares and use the proceeds to lower its debt. Suppose that this does not change operating income, interest rates, tax rates, or total assets. Which statement is m..

  Jernigan corporation balance sheets

Condensed balance sheet and income statement data for Jernigan Corporation are presented here: Compute the following ratios for 2013 and 2014.

  Exchange for australian dollars

Latisha wants to go to Australia. She has $1200 which she wants to exchange for Australian dollars (AUD) How many Australian dollars are her USD worth. The exchange rate is $1 = AUD 1.4939. Giver your answer to the nearest Australian dollar.

  Sales growth rate and price-to-earnings ratio

Consider the cell phone giant company Apples. Apple has 3 Key Financial Ratios: gross margin, sales growth rate, and price-to-earnings (P/E) ratio. How could you use Apple’s example in the real world and how this can help run a business?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd