A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate equals 6 percent. Compute the cost of common stock equity

Q2. A firm has common stock with a market price of $25 per share and an expected dividend of $2 per share at the end of the coming year. The growth rate in dividends has been 5 percent. What is the cost of the firm's common stock equity?

Q3. Lumber Jack Log Homes has 30,000 bonds outstanding that are selling at par. Bonds with similar characteristics are yielding 7.8 %. The company also has 1.5 million shares of common stock outstanding. The stock has a beta of 1.4 and sells for $36 a share. The risk-free rate is 4.5 % and the market risk premium is 8.6 %. Jack's tax rate is 34 %. What is Jack's weighted average cost of capital (WACC)?

Answer rating: 100% (QA)

Q1 The cost of common stock equity can be calculated using the Capital Asset Pricing Model CAPM as f... View the full answer