1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
user100 [1]
3 years ago
6

Stock in Daenerys Industries has a beta of 1.3. The market risk premium is 6 percent, and T-bills are currently yielding 5 perce

nt. The company’s most recent dividend was $2.00 per share, and dividends are expected to grow at an annual rate of 8 percent indefinitely. If the stock sells for $36 per share, what is your best estimate of the company’s cost of equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business
1 answer:
Nadya [2.5K]3 years ago
8 0

Answer:

13.4%

Explanation:

According to the scenario, computation of the given data are as follows:-

Div1 = Dividend Price Per Share × (1 + G)

= $2 × (1 + 8%) = $2 × (1 + 0.08) = $2 × 1.08

= $2.16

As Per Growth Model Cost of Equity = (Div1 ÷ Current Price) +Growth Rate

= ( 2.16 ÷ $36) + 0.08 = 0.06 + 0.08 = 0.14 Or 14%

As Per CAPM Cost of Equity = Risk Free Rate + (Beta × Market Risk Premium)

= 5 + (1.3 × 6) = 5% + 7.8%

= 12.8%

Best Estimate of the Company’s Cost of Equity = (As Per Growth Model Cost of Equity + As Per CAPM Cost of Equity) ÷ 2

= (14% + 12.8%) ÷ 2

= 26.8% ÷ 2

= 13.4%

You might be interested in
Jennifer Orgolini, the chief financial officer at New Belgium Brewery, explains that the benefits and rewards associated with th
Natali [406]

Answer: emotional intelligence

Explanation: The capacity of an individual to control, express and be aware of the emotions of others and himself is called the emotional intelligence.

    In the given case, Jennifer Orgolini is encouraging to the employees to participate in the philanthropy program. Such programs are focused on social welfare and will make the participants more emotionally aware. Thus such motivating depicts the company wants employees that have high emotional quotient.

     

7 0
3 years ago
The standard deviations of individual stocks are generally higher than the standard deviation of the market portfolio because th
NISA [10]

Answer:

has specific risk

Explanation:

Standard deviation is a measure of central tendency. It measures the variation of data from a central value. As such variables with high standard deviation have values far from the central value while standard deviation close to the central value is low.

So when individual stocks have higher standard deviation it means prices are less stable than that of market portfolio.

This can be attributed to them having specific risk. The market is not subject to diversification risk so prices tend to fluctuate less

6 0
3 years ago
Halverstein Company's outstanding stock consists of 7,000 shares of cumulative 5% preferred stock with a $10 par value and 3,000
Alisiya [41]

Answer:

$3,500 preferred; $2,500 common.

$3,000 preferred; $3,000 common.

$0 preferred; $6,000 common.

$4,200 preferred; $1,800 common.

$6,000 preferred; $0 common.

4 0
3 years ago
Quiz - Motivational Theory
lozanna [386]

Answer:

Self-Actualization and Esteem

Explanation:

According to Herzberg's theory, motivators result in personal satisfaction. Motivators come from the intrinsic conditions of the job an employee performs, e.g. recognition (employee of the month), personal growth (a promotion).

Herzberg's motivators relate to the higher levels of Maslow's pyramid, which basically deal with developing the full potential of individuals.

On the other hand, Herzberg's hygiene are related to the lower levels of Maslow's pyramid.

7 0
3 years ago
Garcia Industries has sales of $176,500 and accounts receivable of $18,500. The industry average DSO is 27 days, based on a 365-
Brilliant_brown [7]

Answer: 176,500 = 372,879

Explanation:

5 0
3 years ago
Other questions:
  • One way that nike can examine retention of its female consumers is to review their purchases over several timeframes. this is al
    8·1 answer
  • hen a manager decides to give a sales executive a bonus at the end of the fiscal year for a job well done, it is an _____ for th
    13·2 answers
  • A consumer might read a corporate blog in order to ________.
    7·2 answers
  • Tamarisk, Inc. sells merchandise on account for $2500 to Culver Company with credit terms of 2/15, n/30. Culver Company returns
    11·1 answer
  • ebecca is a marketing executive at an airline company. She has been asked to plan her company’s online advertising budget on a m
    5·1 answer
  • On May 31, 20X1, the Arlene Corporation adopted a plan to sell its cosmetics line of business, considered a component of the ent
    6·2 answers
  • Suppose that you have $100 today and expect to receive $100 one year from today. Your money market
    8·1 answer
  • What are some common traits good entrepreneurs have?
    6·2 answers
  • When working with text boxes and shapes, which tab contains settings for applying shadows and 3-D rotation to objects?
    7·1 answer
  • the supply of a good will be more elastic, the a. more the good is considered a luxury. b. broader is the definition of the mark
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!