What is the cost of equity-market capitalization rate

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Reference no: EM131182143

Catalina Bank (CB) currently pays a dividend of $2.75 per share. T-bills are paying a 1.45% return and the market is anticipated to earn 9.65% per year. AAS has a beta of 1.32 and retains 60% of their earnings every year. CB earnings and dividends are expected to grow 10.6% per year for the next three years, then 8.6% for the following two years, before settling at constant 6.2% growth forever after.

a. What is the cost of equity (market capitalization rate) for CB?

b. What is the value of CB shares today?

c. If CB shares are selling for that value, what is PVGO per share for the company?

Reference no: EM131182143

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