Go to finance.yahoo.com and look up the information for Allegheny Technologies (ATI), a metal manufacturing company in
Question:
Go to finance.yahoo.com and look up the information for Allegheny Technologies (ATI), a metal manufacturing company in the S&P 500. You want to estimate the cost of equity for the company. First, find the current Treasury bill rate. Next, find the beta for Allegheny Technologies. Using the historical market risk premium, what is the estimated cost of equity for ATI using the CAPM? Now find the analysts' growth rate estimates for the next five years for the company. Using this growth rate in the dividend growth model, what is the estimated cost of equity? Now find the dividends paid by the company over the past five years and calculate the arithmetic and geometric growth rates in dividends. Using these growth rates, what is the estimated cost of equity? Looking at these four estimates, what cost of equity would you use for the company?
Cost Of EquityThe cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
The current yield of the Treasury bill can be found on the finance yahoo com website by searching fo...View the full answer
Essentials Of Corporate Finance
ISBN: 9780073382463
7th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
