Firm cost of common equity using the capm approach

Assignment Help Financial Management

Reference no: EM131541280

Cost of Common Equity

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 3% per year. Callahan's common stock currently sells for $28.00 per share; its last dividend was $2.00; and it will pay a $2.06 dividend at the end of the current year.

Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.

%10.36

If the firm's beta is 1.80, the risk-free rate is 4%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places.

%20.2

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 Callahan's cost of common equity? Round your answer to two decimal places. Do not round your intermediate calculations.

Reference no: EM131541280

Questions Cloud

Compute the expected return and standard deviation : Compute the expected return and standard deviation.

Discuss and review assumptions and budget parameters : Discuss and review assumptions and budget parameters - review these during the budget process as needed and Identify any financial risks and incorporate protection strategies

Why are they a problem in latin america context : What are the institutional basics necessary for economic growth? Why are they a problem in Latin America context?

Discuss schedules of reinforcement worksheet : Mrs. Blass is tired of her students not being prepared for class each day. She knows that they are hard-working seniors who value getting an A in the class.

Firm cost of common equity using the capm approach : what is its cost of common equity? what will be the firm's cost of common equity using the CAPM approach?

What is the net hedging result : What is the number of contracts? What is the futures gain or loss? What is the net hedging result?

What is the annualized forward premium of the yen : What is the annualized forward premium of the Yen?

Create a new product that would appeal to your market : Create a new product that would appeal to your market. Your company has decided to launch a new line of products

Discuss about the uniformitarianism and catastrophism : Explain the differences between the following theories, Uniformitarianism, Catastrophism, and Punctuated Equilibrium in your own terms.

User Account

All Pages