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1) What is the relationship between the required return on an investment and the cost of capital associated with that investment?

2 The Zombie Corporation's common stock has a beta of 1.2. If the risk-free rate is 4.8 percent and the expected return on the market is 11 percent, what is the company's cost of equity capital?

3) Stock in Dragula Industries has a beta of 1.1. The market risk premium is 7 percent, and T-bills are currently yielding 4.5 percent. The company's most recent dividend was $1.70 per share, and dividends are expected to grow at a 6 percent annual rate indefinitely. If the stock sells for $39 per share, what is your best estimate of the company's cost of equity?

Basic Finance, Finance

  • Category:- Basic Finance
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