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
Ira Lisetskai [31]
3 years ago
14

Stock in CDB Industries has a beta of 1.10. The market risk premium is 7 percent, and T-bills are currently yielding 4 percent.

The most recent dividend was $3.40 per share, and dividends are expected to grow at an annual rate of 5 percent indefinitely. The stock sells for $56 per share. Using the CAPM, what is your estimate of the company's cost of equity
Business
1 answer:
12345 [234]3 years ago
3 0

Answer:

Cost of equity = 11.7%

Explanation:

<em>The capital asset pricing model is a risk-based model. Here, the return on equity is dependent on the level of reaction of the the equity to changes in the return on a market portfolio. These changes are captured as systematic risk. The magnitude by which a stock is affected by systematic risk is measured by beta.</em>

Under CAPM, Ke= Rf + β(Rm-Rf)  

Rf-risk-free rate,-4%,  β= Beta-1.10, (Rm-Rf) = 7% ,Ke = cost of equity

Using this model,  

Ke=4% + 1.10×7%

= 11.7 %

Cost of equity = 11.7%

You might be interested in
An adult with a developmental disability works at a local product fulfillment and distribution center. She takes the bus to get
harkovskaia [24]

Answer: Tracking and identification.

Explanation: In other ease the woes and stress of such individual, integrating a tracking and identification capability on her app will be of great help. This will ensure that she could be easily and effectively located by leveraging the ability of the geographic positioning system in other to correctly get and know are current location. With these she could be picked easily when issues of drops off at the wrong location. Trackers allows one to determine the current location of items or individuals in which the tracking devices are placed on. As it also gives signals when one gets to the current position of the item or individual for proper identification. With these locating her will become very easy and hassle free during instances of wrong drop off.

7 0
3 years ago
Are yall doing anything for summer vacation?
musickatia [10]

Answer: Nah just hanging out at home

Doing literally nothing.....sigh.......bored

4 0
3 years ago
After+a+student+synthesized+an+organic+compound,+she+calculated+her+reaction+yield+to+be+101%. +which+of+the+following+is+not+a+
torisob [31]

Gurl I am new here too so anything that you learned plz share I am in imitate help

7 0
2 years ago
Different between internal stakeholder and external stakeholder
Delicious77 [7]

Internal stakeholders are entities within a business (eg. employees, managers, the board of directors, investors). External stakeholders are entities not within a business itself but who are about or are affected by its performance. (eg. consumers, regulators, investors, suppliers)

8 0
4 years ago
What is the final step for creating a chart in PowerPoint?
Sergio [31]

Answer:

step 1: click instead> Chart

step 2: click th3 chart type and then double click th3 chart you want.

step 3: in th3 worksheet that appears, replace the placeholder data with your own information.

step 4: when you insert a chart, small buttons appear next to the upper right corner.

step 5: when finished, close th3 worksheet

8 0
2 years ago
Other questions:
  • Two lawyers are arguing against each other in court. the first, ms. smith, tries to persuade the jury with logical, relevant arg
    7·1 answer
  • Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2021, the company had ac
    7·1 answer
  • Nine subjects, 87 to 96 years old, were given 8 weeks of progressive resistance weight training. strength before and after train
    12·1 answer
  • Toys Unlimited has the following cost data available. Direct Materials are $99 per unit. Direct Labor is $55 per unit. Variable
    15·1 answer
  • Magnira Corp., a small-scale e-learning firm, recently bought a three-year license of a cloud-based software. The software provi
    15·1 answer
  • Celine Co. will need €500,000 in 90 days to pay for German imports. Today's 90-day forward rate of the euro is $1.07. There is a
    13·1 answer
  • Treasury bills are currently paying 6 percent and the inflation rate is 3 percent. a. What is the approximate real rate of inter
    5·1 answer
  • ________________ mortgage is two or more mortgages consolidated into one payment, and is usually designed to allow the buyer to
    8·1 answer
  • MCZ, Inc. is a corporation that was incorporated under the laws of the State of New Jersey. MCZ, Inc. has only one office which
    9·1 answer
  • 2. Now, find out what type of business it actually is. If you chose a small business, it is likely to be a sole proprietorship o
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!