Cost of Common Equity The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are...

50.1K

Verified Solution

Question

Advance Math

Cost of Common Equity
The future earnings, dividends, and common stock price ofCarpetto Technologies Inc. are expected to grow 4% per year.Carpetto's common stock currently sells for $25.50 per share; itslast dividend was $2.00; and it will pay a $2.08 dividend at theend of the current year.

Using the DCF approach, what is its cost of common equity?Round your answer to two decimal places.
%

If the firm's beta is 1.30, the risk-free rate is 3%, and theaverage return on the market is 12%, what will be the firm's costof common equity using the CAPM approach? Round your answer to twodecimal places.
%

If the firm's bonds earn a return of 9%, based on thebond-yield-plus-risk-premium approach, what will be r_s?Use the midpoint of the risk premium range discussed in Section10-5 in your calculations. Round your answer to two decimalplaces.
%

If you have equal confidence in the inputs used for the threeapproaches, what is your estimate of Carpetto's cost of commonequity? Round your answer to two decimal places.
%

Answer & Explanation Solved by verified expert

4.4 Ratings (849 Votes)

GivenDividend growth rate g 4Common Stock value P0 2550 per shareDividend just paid or Last dividend D0 2Current year dividend to pay D1 208a Cost of Common See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member