Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem: The financial information is available on Fargo Fabrics, Inc.:

Current per-share market price = $20.25

Current per-share dividend = $1.12

Current per-share earnings = $2.48

Beta = 0.90

Expected market risk premium = 6.4 percent

Risk-Free rate (20 year Treasury bonds) = 4.2 percent

Past ten years earnings per share:

20X1

$1.39

20X6

$1.95

20X2

1.48

20X7

2.12

20X3

1.6

20X8

2.26

20X4

1.68

20X9

2.4

20X5

1.79

20Y0

2.48

The past -earnings growth trend is expected to continue for the foreseeable future. The dividend payout ratio has remained approximately constant over the past ten years and is expected to remain at current levels for the foreseeable future. Determine the cost of equity capital using the following methods:

[A] The Capital Asset Pricing Model approach
[B] The constant growth rate dividend capitalization model approach

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M916092

Have any Question? 


Related Questions in Basic Finance

Imagine that your town or city has increased its nighttime

Imagine that your town or city has increased its nighttime police patrols to reduce crime. Design two quasi-experiments to determine whether this intervention has been effective, one that uses some variation of a nonequi ...

Lauren has worked for a company with a retirement program

Lauren has worked for a company with a retirement program, and today is retiring from her job with the amount of $125000 in her retirement account. She decides to withdraw an equal amount from this account, once a year, ...

Explain both interest rate swaps and currency swaps which

Explain both interest rate swaps and currency swaps. Which instrument has a greater credit risk: an interest rate swap or a currency swap? How can multinational companies utilize a currency swap to reduce borrowing costs ...

1 when a doublet is added to a uniform stream so that the

1. When a doublet is added to a uniform stream so that the source part of the doublet faces the stream, a cylinder flow results. Plot the streamlines when the doublet is reversed so that the sink faces the stream. 2. A 2 ...

You buy a 10-year bond with a 4 coupon rate paid annually

You buy a 10-year bond with a 4% coupon rate (paid annually) and a $1,000 face valueat par. If the yield to maturity increases to 5% per year compounded annually one yearfrom now, what is your 1-year holding period retur ...

Consider the following facts about hedge funds1 the share

Consider the following facts about hedge funds: 1. "[The] share of industry assets held by firms with more than $1 billion under management has risen gradually from about 75 percent in 2006 to about 82 percent at the sta ...

At your discount brokerage firm it costs 995 per stock

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

1 what is the advantage of using multiple measures for a

1. What is the advantage of using multiple measures for a single variable? What is the disadvantage? 2. Briefly explain how a ceiling effect (or floor effect) can affect the outcome of a research study.

1 what is a mortgage pay-through bond mptb how does it

1. What is a mortgage pay-through bond (MPTB)? How does it resemble a mortgage-backed bond (MBB)? How does it differ? 2. Are the overcollateralization requirements for mortgage pay-through bonds the same as for mortgage- ...

Explain the advantages and disadvantages to a call buyer of

Explain the advantages and disadvantages to a call buyer of closing out a position prior to expiration rather than holding it all the way until expiration? Suppose that one is considering buying a call at a particular ex ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen