A company has a beta of 125 the market risk premium is, Ask an Expert

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A company has a beta of 1.25. The market risk premium is expected to be 8%, and the current risk-free rate is 4%. Market believes our dividends will grow at 6% per year and our next year’s dividend is $4.54. The stock is selling for $45.

a. What is the cost of equity using CAPM?

b. What is cost of equity using DGM model?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92875347

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