Floyd Industries stock has a beta of 1.50. The company just paid a dividend of $.80, and
Question:
Floyd Industries stock has a beta of 1.50. The company just paid a dividend of $.80, and the dividends are expected to grow at 5 percent. The expected return of the market is 12 percent, and Treasury bills are yielding 5.5 percent. The most recent stock price for Floyd is $61.
a. Calculate the cost of equity using the DCF method.
b. Calculate the cost of equity using the SML method.
c. Why do you think your estimates in (a) and (b) are so different?
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a To calculate the cost of equity using the Dividend Discount Model DCF method we can use the formul...View the full answer
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Related Book For 
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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