### What would you estimate carpetto cost of equity to be

Assignment Help Accounting Basics
##### Reference no: EM131524736

Question: The earnings, dividends, and stock price of Carpetto Technologies Inc. are expected to grow at 7 percent per year in the future. Carpetto's common stock sells for \$23 per share, its last dividend was \$2.00, and the company will pay a dividend of \$2.14 at the end of the current year.

a. Using the discounted cash flow approach, what is its cost of equity?

b. If the firm's beta is 1.6, the risk-free rate is 9 percent, and the expected return on the market is 13 percent, what will be the firm's cost of equity using the CAPM approach?

c. If the firm's bonds earn a return of 12 percent, what will rs be using the bondyield-plus-risk-premium approach? (Hint: Use the midpoint of the risk premium range.)

d. On the basis of the results of parts a through c, what would you estimate Carpetto's cost of equity to be?

#### Questions Cloud

 What is the firms component cost of debt : A company's 6 percent coupon rate, semiannual payment, \$1,000 par value bond that matures in 30 years sells at a price of \$515.16. What are the steps to take to determine who is involved : What are the items you should look for in a compliant to determine validity?What are the steps to take to determine who is involved? Briefly describe the five-step process : Assignment: Revenue Arrangements- Briefly describe the five-step process. Explain the importance of contracts when analyzing revenue arrangements. Leadership changes at alcoa : Write between 700-1200 using Microsoft Word in APA style, see example below. What would you estimate carpetto cost of equity to be : The earnings, dividends, and stock price of Carpetto Technologies Inc. are expected to grow at 7 percent per year in the future. Carpetto's common stock sells. Explain about the military industrial complex : Please research the term "Military Industrial Complex". What does this term mean, who coined the term and when? What do you think are the ethical issues in the case : What do you think are the ethical issues in the case? Discuss how you would resolve the ethical issues and the reasons supporting your decisions. Calculate the past growth rate in earnings : The Bouchard Company's current EPS is \$6.50. It was \$4.42 5 years ago. The company pays out 40 percent of its earnings as dividends, and the stock sells. Discuss the phenomenon of charismatic leaders : Where have military regimes successfully developed Third World economies and where have they failed to do so?

### Write a Review

#### During the month fixed cost were 19316 and variable cost

in the month of march new day spa services 565 clients at an average price of 110. during the month fixed cost were

#### Income before interest and taxes is expected to be 3500000

martin corporation is considering two alternatives to finance its purchase of a new 4000000 office building.a issue

#### Assignment-lasa - final project report

Prepare an 8-10-page report in Word. This report should include a project history of your recent Trillo Apparel Company District 4 Production Warehouse Move experience over the last five weeks.

#### Why are consumers generally more concerned with business

Why are consumers and the public generally more concerned with ethical and socially responsible business behavior today than they were, say, fifty years ago?

#### Discuss the three approaches for reporting changes

Discuss the three approaches for reporting changes in accounting principles. Include additional points about how these approaches may be impacted by the adoption of new IFRS standards.

#### Discuss the actions you would employ as a cpa to prevent

identify and evaluate the issues related to the internally created software for HouseRaising. Discuss the potential problems related to the capitalization of internally created software and the requirements for capitalization under GAAP.

#### Calculate the current and quick ratios for each of three

1. edison stagg and thornton have the following financial information at the close of business on july

#### Russell owns 30 percent of the outstanding stock of thacker

russell owns 30 percent of the outstanding stock of thacker and has the ability to significantly influence the

#### Journalize the allocation of the loss from income summary

Journalize the allocation of the loss from Income summary and what are the balances in Lawlor and Tanya's capital accounts on March 31? Prepare T-accounts to answer the question.

#### Prepare a job cost sheet

Prepare a Job Cost Sheet for Job No.13A, following proper format

#### How should mask account for the purchase and sale

How should Mask account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in the balance sheet at December 31, 2010?

#### Identify all of the mutually exclusive alternatives

A manager has up to \$190,000 available to invest in new construction equipment for the company. The manager must purchase a new dump truck.