Equity for blue dog using the dividend valuation model

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Reference no: EM131453807

The Blue Dog Company has common stock outstanding that has a current price of $20 per share, and its next projected dividend is $.50. Blue Dog’s earnings and dividends are expected to grow at 3% per year, in perpetuity. The current risk-free rate of return is 2.5%, and the market risk premium is 5%. Blue Dog’s operations are 20% more risky than the market as a whole.

What is the cost of equity for Blue Dog using the dividend valuation model?

What is the cost of equity for Blue Dog using the capital asset pricing model?

Reference no: EM131453807

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