1. LLP Utility paid a dividend this year of $1.00/share. they have increased their dividend payout 5%...
Fantastic news! We've Found the answer you've been seeking!
Question:
1. LLP Utility paid a dividend this year of $1.00/share. they have increased their dividend payout 5% every year for the past 50 years and expect this to continue indefinitely. the stock currently sells for $20. other info: LLP beta = .9; treasury return =3.5%; market premium = 4%.
a) using the CAPM model, what is the required return for the stock? carry answer out to one decimal place.
b) using the dividend growth model, what is the required return for the stock? carry answer out to one decimal place.
2. Alpha corp. is selling 30 year, 10% coupon bonds, each with a par value of $1,000. because its coupon rate is higher than the market, Alpha can sell its bonds for $1,200. Bonds pay annual coupon interest. Alpha must pay a $30 per bond flotation cost to issue its bonds. Alpha’s tax rate is 40%. what is alpha’s after tax cost of this debt?
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date: