Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the earnings, dividends, and stock price of shelby

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per...

80.2K

Verified Solution

Question

Finance

The earnings, dividends, and stock price of Shelby Inc. areexpected to grow at 4% per year in the future. Shelby's commonstock sells for $23 per share, its last dividend was $2.50, and thecompany will pay a dividend of $2.60 at the end of the currentyear.

  1. Using the discounted cash flow approach, what is its cost ofequity? Round your answer to two decimal places.

      %

  2. If the firm's beta is 1.8, the risk-free rate is 7%, and theexpected return on the market is 11%, then what would be the firm'scost of equity based on the CAPM approach? Round your answer to twodecimal places.

      %

  3. If the firm's bonds earn a return of 11%, then what would beyour estimate of rs using theown-bond-yield-plus-judgmental-risk-premium approach?(Hint: Use the mid-point of the risk premium range.) Roundyour answer to two decimal places.

      %

  4. On the basis of the results of parts a–c, what would be yourestimate of Shelby's cost of equity? Assume Shelby values eachapproach equally. Round your answer to two decimal places.

      %

Answer & Explanation Solved by verified expert
3.5 Ratings (487 Votes)
    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: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Beginning with the Koch curve with a lin step 0

Basic Math
Q

The unadjusted trial balance and related adjusting journalentries for McAfee Consulting Services is presented...

Accounting
Q

Calculate and fill in the missing values in the table below Moon Distance from Jupiter Period Io 42 hours Europa 6.71105km Callisto 17 days Ganymede 1.07106km 172 hours

Physics
Q

Many global companies have evolved to or are evolving to, a ‘stateless corporation’.  The US and most...

Economics
Q

Studies have shown that the frequency with which shoppers browse Internet retailers is related to the...

Basic Math
Q

1.     What is true regarding integer programming/ A)    Optimal decision variables will be 0 or 1 B)    Excel solver does not provide sensitivity...

General Management
Q

ribes giving alternative forms for coordinates of a point Click here to watch the video...

Basic Math
Q

K Points 0 of 1 An entrepreneur invests in a new play The cost includes...

Basic Math
Q

Horizontal Analysis of the Income Statement Income statement data for Cascade Images Inc. for the...

Accounting
Q

number entry box blank. Enter account decreases and cash outflows as negative amounts. number entry...

Accounting
Q

As before, Company A has EBITDA of $110 million and debt of $30 million, assuming...

Finance
Q

Sanders, Incorporated, paid a $3 dividend per share last year and is expected to continue...

Finance