What is the cost of common equity

Assignment Help Financial Management
Reference no: EM13891883

Cost of Equity: DCF

Summerdahl Resorts' common stock is currently trading at $30.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 5% a year. What is the cost of common equity? Round your answer to two decimal places.

%

Reference no: EM13891883

Questions Cloud

What is the exact real rate : Treasury bills are currently paying 6 percent and the inflation rate is 2.8 percent. What is the approximate real rate of interest? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Approximate real rate % What is the exact r..
About the coupon bond with annual payments : Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 10.9 percent and the maturity date is 11 years from today. What is the market price of this bond if the face value is $1,000?
Coupon bond with annual payments : Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 10.9 percent and the maturity date is 11 years from today. What is the market price of this bond if the face value is $1,000?
Expect the stock price of gm to increase : Suppose that I expect the stock price of GM to increase by about 15% over the next two months from $50 to $57.50. To monetize my view, I sell a put option on GM with 2 months to maturity with X= $57.50 and buy aput option again with 2 months to matur..
What is the cost of common equity : Summerdahl Resorts' common stock is currently trading at $30.00 per share. The stock is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75), and the dividend is expected to grow at a constant rate of 5% a year. What is the..
Is there an arbitrage profit opportunity here : Suppose that you noticed the following prices: P=$48; S=$4; X=$50, for a one year European put option. The simple risk-free interest rate is 10% per year. Is there an arbitrage profit opportunity here? Yes or no?
Calculate the after-tax cost of debt : Calculate the after-tax cost of debt under each of the following conditions: Interest rate of 13%; tax rate of 0%. Round your answer to two decimal places. Interest rate of 13%; tax rate of 15%. Round your answer to two decimal places.
Compensation by stock options : Explain why managers might want to hedge less if they are compensation by stock options (holding everything else the same).
Call option on exxon at a premium : On January 11, 2015, I purchased a call option on Exxon at a premium of $14.5, exercise price of $50 and March 15, 2007 maturity. On January 21,2015, I closed my position by buying a put option on Exxon at a premium of $8.5, exercise price of $50 and..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Revaluating asset life categories used for ACRS depreciation

The IRS is revaluating the asset life categories used for ACRS depreciation. The trucks that JK Industries use are currently classified by the IRS as having an asset life of 7 years. Because these trucks actually last for 10 years, the firm’s manager..

  What is the value of the investment

If you have an investment that pays you $4000 two years from today,$5000 three years from today, and $6000 four years today. What is the value of the investment today if the appropriate interest rate 6% per year compounded annually?

  Find the periodic payment

Find the periodic payment R required to amortize a loan of P dollars over t years with interest charged at the rate of r% year compounded m times a year.

  Cost of capital for a firm with debt-equity split

The company cost of capital for a firm with a 65/35 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:

  Assumming you finance through dealer what will payments be

A new truck costs $34,000 and dealer offers 1.9% APR financing for 48 months (payments made at the end of month) Assumming you finance through dealer what will payments be?

  What is the average accounts payable for APP

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $750,000 each day. The company purchases the inventory under the credit terms of 1/15, net 35. APP always takes the discount, but takes the full 15 days to pay its ..

  What is the expected return on the portfolio

You own a portfolio that is 32 percent invested in Stock X, 20 percent in Stock Y, and 48 percent in Stock Z. The expected returns on these three stocks are 6 percent, 19 percent, and 15 percent, respectively. What is the expected return on the portf..

  What is present value of the savings

Your company will generate $60,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 8.50 percent, what is the present value of the savings?

  Discount rate while evaluating all its domestic projects

DDD uses constant 12% WACC as discount rate while evaluating all its domestic projects. What do you foresee happening with its WACC in the next five years?

  Firms dividend policy

To look at the firm's dividend policy, you look at RAD's financial statements for the last year. RAD, in 2013, had net income of $118 million (operating income $1,132 million), capital expenditures of $315.846 million, depreciation and amortization o..

  Division qualifies as a component of the entity according

The Claxton Company manufactures children's toys and also has a division that makes automobile parts. Due to a change in its strategic focus, the company sold the automobile parts division. The division qualifies as a component of the entity accordin..

  Sustainable growth rate to equal to internal growth rate

Which one of the following will cause the sustainable growth rate to equal to internal growth rate?

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