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]
2 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]2 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
Metro Facilities, Inc., contracts to sell a parking garage to Nouveau Property Company. The contract provides that if Metro does
Inga [223]

Answer:

D) a penalty clause

Explanation:

Penalty clauses are usually not enforced by the courts since they generate an excessive charge against the other party for defaulting or breaching a contract. Generally penalty clauses are considered excessive since they aren't proportional to the damages incurred.  

6 0
3 years ago
A customer tells you that they “must have” a particular item that you are out of in your store. You can tell that the customer i
Lostsunrise [7]
You can tell that the costumer is impatient and appears to be after what they are looking for.
3 0
3 years ago
Is there anyone who's good in economics that can help me with my questions and can provide me the CORRECT answers, please?
Alex777 [14]
I am willing to assist you in economics I passed with an A !
6 0
3 years ago
Read 2 more answers
Suppose that the office of management and budget provides the accompanying estimates of federal budget​ receipts, federal budget
spin [16.1K]
We need to <span>provide the accompanying estimates of federal budget​ receipts, federal budget​ spending, and​ gdp, all expressed in billions of dollars</span>.
4 0
3 years ago
Generally when do glaciers advance downward, causing further erosional landforms? throughout the entire year during colder seaso
melamori03 [73]
<span>Generally, it is during the colder seasons that glaciers tend to advance downward, causing further erosional landforms.  Items below are facts regarding Glaciers according from the <span>National Oceanic and Atmospheric Administration (NOAA) who studies the skies and the oceans: </span></span>

<span>1. </span><span>Approximately 10 percent of Earth's land is covered with glaciers. </span>

<span>2. </span>Glaciers covered 32 percent of land during the last Ice Age.

<span>3. </span>Glaciers store about 75 percent of the world's fresh water.

<span>4. </span>Antarctic ice is more than 2.6 miles approximately 4,200 meters thick in some areas.

<span>5. </span>If all land ice melted, sea level would rise approximately 230 feet (70 meters) worldwide.





4 0
3 years ago
Other questions:
  • Sylvio purchased an apartment building as an investment in January 2008 for $383,500 and sold it for $475,000 in 2014. He report
    15·1 answer
  • The accountant for Huckleberry Company is preparing the company's statement of cash flows for the fiscal year just ended. The fo
    5·1 answer
  • Loyal customers are price _____________ compared to brand-shifting patrons.
    7·1 answer
  • Which type of evidence serves to substantiate the distinct set of elements whose commission or omission must be demonstrated to
    7·1 answer
  • Your discount brokerage firm charges $7.95 per stock trade. how much money do you need to buy 200 shares of pfizer, inc. (pfe),
    9·1 answer
  • Stakeholders in a typical corporation include:a) employeesb) employees and managementc) employees, management, customers and own
    13·1 answer
  • Recent research that analyzed the content of commercial bottled water indicates that ________. bottled water consumes less fossi
    13·1 answer
  • A test is scheduled for Monday morning, but you went to a party on Saturday night. If you hadn't attended the party, you could h
    6·1 answer
  • The mayor of Lexington, Kentucky, held a press conference to comment on some changes to a local ordinance and explain how it wou
    13·1 answer
  • Effectively communicating the strategic vision to company personnel is important because:__________
    9·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!