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mixas84 [53]
3 years ago
9

Stock in ABC Enterprises has a beta of 1.28. The market risk premium is 7.4 percent, and T-bills are currently yielding 3.6 perc

ent. ABC's most recently paid dividend was $1.62 per share, and dividends are expected to grow at an annual rate of 2 percent indefinitely. If the stock sells for $38 a share, what is your best estimate of ABC's cost of equity?
Business
1 answer:
konstantin123 [22]3 years ago
5 0

Answer:

Cost of equity = 6.34%

Explanation:

Provided information is as follows:

Beta = 1.28

Market risk premium = 7.4%

T-Bills yield = Risk free return = 3.6%

Dividend given = $1.62

Growth rate g = 2%

Current price = $38

Using Capital Asset Pricing Model

Cost of equity = Risk free return + Beta (Market risk - Risk free return)

= 3.6% + 1.28 (7.4 - 3.6)

= 3.6% + 4.864% = 8.464%

Using dividend growth model

Current price of share = \frac{Dividend\: paid \: + \: growth }{Cost \: of \: equity\: - \: growth}

$38 = \frac{1.62 + (0.02\times1.62)}{Cost\: of\: equity\: -\: 0.02}

Cost of equity - 0.02 = \frac{1.6524}{38} = 4.34%

Cost of equity = 4.34 + 2 = 6.34%

But the best estimate is using dividend growth model as this is company specific while capital asset pricing model uses the industry and market rates and do not consider company performance.

Therefore, cost of equity = 6.34%

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Answer:

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Explanation:

The computation of the ending balance is shown below:

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Therefore the ending balance of the unearned revenue is $3,225

The above formula should be applied

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3 years ago
​Brad's gross pay for the month is $ 6 comma 400. His deduction for federal income tax is based on a rate of 22​%. He has no vol
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Answer:

$4,502

Explanation:

​Brad's gross pay for the month is $6,400. His deduction for federal income tax is based on a rate of 22​%.

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3 0
2 years ago
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Yuliya22 [10]

Answer:

(B) Analysis and design of work

Explanation:

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Along with , listening to the complains and resolving them ,

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The best reason for the reduction in manufacturing jobs is that These jobs are often outsourced to overseas factories.

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As a result of these jobs being shipped abroad, manufacturing jobs in developed countries are suffering and will decrease in the next few years.

In conclusion, option B is correct.

Find out more on manufacturing jobs at brainly.com/question/25553251.

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Economic growth in the country of Southville has slowed down in the last few months. Following a collapse in housing​ prices, se
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Complete Question:

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B. The standards for obtaining a mortgage loan in Southville have been more stringent compared to many other countries.

C. Prior to the crisis, the prices of existing homes also increased in proportion to the prices of new homes in Southville.

D. A large proportion of home buyers in Southville were individuals who already owned one or more houses.

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