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lilavasa [31]
3 years ago
10

g Mystery Inc has a beta of 1.1. The firm just paid a dividend of 60 cents and the dividends are expected to grow at 5.5% per ye

ar. The expected return on the market is 10% and treasury bills have a yield of 5%. The company's current stock price is $45. Calculate the cost of equity using the dividend growth model.
Business
1 answer:
12345 [234]3 years ago
4 0

Answer:

6.91%

Explanation:

The formula for share price using the dividend growth model stated below can be used to determine the cost of equity as well whereby the formula is rearranged in order to make the cost of equity the subject as shown thus:

share price=expected dividend/(cost of equity-growth rate)

share price=$45

expected dividend=last dividend*(1+dividend growth rate)

expected dividend=$0.60*(1+5.5%)=0.633

cost of equity=the unknown

dividend growth rate=5.5%

45=0.633/(cost of equity-5.5%)

45*(cost of equity-5.5%)=0.633

cost of equity-5.5%=0.633/45

cost of equity=(0.633/45)+5.5%

cost of equity=6.91%

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e

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8 0
2 years ago
Assume your goal in life is to retire with $2,500,000. How much would you need to save at the end of each year if interest rates
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Answer:

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Explanation:

Giving the following information:

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4 0
3 years ago
When sodium chloride, NaCl , is added to water, it forms a solution. The steps involved in the dissolution of NaCl in water are
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Surely, when sodium chloride, NaCl , is added to water, it forms a solution which

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Reaction wise, when sodium chloride, NaCl , is added to water, the water molecules pull the sodium and chloride ions far apart, thereby; breaking the ionic bond that held them together. After the salt compounds are pulled apart, the sodium and chloride atoms are surrounded by water molecules

<h3>What is homogeneous solution?</h3>

Homogeneous solutions can be defined as those solutions with uniform composition and properties throughout the solution.

So therefore, surely, when sodium chloride, NaCl , is added to water, it forms a solution which is known as homogeneous solution

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7 0
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