Cost of equity, Corporate Finance

Data:  RF = 4%      Market Risk Premium = 6%

GeKay Inc. is an all-equity firmwith an equity beta of 0.4 and yearly EBIT of $1,000,000 that is expected to continue "forever" (in perpetuity).All purchases and sales are in cash and there is no depreciation.

All earnings are paid out as dividends. GeKay has 100,000 shares of common stock outstanding, and pays taxes at the (marginal) rate of 36%.  Suppose we are in an M&M (Miller and Modigliani) world with taxes- but note that CAPM does apply.

1.            What is GeKay's cost of equity?

2.            Determine GeKay's stock price? 

 

 

Posted Date: 3/30/2013 2:57:56 AM | Location : United States







Related Discussions:- Cost of equity, Assignment Help, Ask Question on Cost of equity, Get Answer, Expert's Help, Cost of equity Discussions

Write discussion on Cost of equity
Your posts are moderated
Related Questions
Two firms, Alpha and Beta, are in the same business and size and identical in all respects except the way in which they have financed their assets. If the economy does well in th

a) Cookie Monster Inc. (a $15 billion snack food company) is considering acquiring Keebler Elves but is unsure of how much is should be willing to pay for the target firm.  At the

Determine pay back period and net present value? A company is considering two projects with the subsequent cash flow streams:   Year           Project A

short term financial planning case study

Question: The National Coach Company (NCC), where you work as Marketing Manager, has agreed on a market development strategy. A key objective is to encourage 40% of car drivers

As the company''s sales and earnings increased, so did the demand for capital. The firm''s needs included inventory as well as additional space to house the inventory, computer fac

I''m studying Accounting course, but English is my second lauguage, it''s vey hard for me to do this, and time is runing out. would you help me with an assignment about the Trible

Hallo I have to prepare a case study in cooperate finance. It is a balance sheet and different adjustments. I would need your help to reflect my results. Is this possible?

Problem: "It is simply not really the company's choice who is and is not a stakeholder" (a) Evaluate the above statement in the context of Civil Society Organisations as st