Cost of common equitythe earnings dividends and common, Ask an Expert

Accounting

Cost of common equity

The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 11% per year in the future. Carpetto's comon stock sells for $23 oer share, its last dividend was $2.00, and it will pay a dividend of $2.14 at the end of the current year.

a) Using the DCF approach, what is its cost of common equity?

b) If the firm's beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach?

c) If the firm's bonds earn a return of 12%, what will Rs be based on the bond-yield-plus-risk-premium approach, using the midpoint of the risk premium range?

d) Assuming you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity?

View complete question

Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M9726129

Have any Question?Write your Review or question?

Related Questions in Financial Accounting

Part adbm financial solutionsyou are a financial consultant

Part A DBM Financial Solutions You are a financial consultant working with DBM Financial Solutions and have a portfolio of clients you work with in achieving financial management solutions. Client 1- Manhattan Limited Yo ...

Assignment - problem questionsthis assessment task consists

Assignment - Problem questions This assessment task consists of five (5) questions. All workings, when appropriate, must be shown to substantiate your answers. Question 1 - Financial statement disclosures You are the fin ...

The ipl just signed sachin to a contract consisting of

The IPL just signed Sachin to a contract consisting of eight, end-of-year payments worth $9 million each, with the first payment precisely one year from today. On the other hand, Dhoni recent deal calls for six annual pa ...

In its first year of operations cullumber company

In its first year of operations, Cullumber Company recognized $31,800 in service revenue, $6,600 of which was on account and still outstanding at year-end. The remaining $25,200 was received in cash from customers. The c ...

Accounting financial assignment -question - in recent years

Accounting Financial Assignment - Question - In recent years a number of companies have gone into liquidation (been 'wound up') because they have not been able to meet their liabilities when they fell due. In Australia, ...

What has been strides position on dividend payouts in the

What has been Strides' position on dividend payouts in the past (pattern, relationship with earnings, etc.)? What factors affected its dividend policy?

Ww productswith new productssales revenue

Without New Products With New Products Sales revenue $11,686,200 $16,263,600 Net income $486,300 $878,400 Average total assets $5,917,600 $13,539,700 (a) Compute the company's return on assets, profit margin, and asset t ...

Case study - the athletes storerequiredonce you have read

Case Study - The Athletes Store Required: Once you have read through the assignment complete the following tasks in order and produce the following reports Part 1 i. Enter the business information including name, address ...

Listed below are selected account balances for pinnacle

Listed below are selected account balances for Pinnacle Corporation at December 31, Year 1 and Year 2. Also available for you is selected information from the income statement for Pinnacle for the year ended December 31 ...

Chelsea is expected to pay an annual dividend of 126 a

Chelsea is expected to pay an annual dividend of $1.26 a share next year. The market price of the stock is $24.09 and the growth 2.6 percent. What is the cost of equity?

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Financial Accounting Expert