Benton Industries stock has a beta of 1.15. The company just paid a dividend of $.95, and
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Benton Industries stock has a beta of 1.15. The company just paid a dividend of $.95, and the dividends are expected to grow at 3.9 percent per year. The expected return on the market is 11 percent, and Treasury bills are yielding 4.3 percent. The current price of the company’s stock is $71.
a. Calculate the cost of equity using the DDM.
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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Related Book For
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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