The Miller Co. has paid increasing dividends of $.54, $.58, $.62, $.67, and $.72 a share...

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The Miller Co. has paid increasing dividends of $.54, $.58, $.62, $.67, and $.72 a share over the past five years, respectively. The firm estimates that future increases in their dividends will be comparable to the arithmetic average growth rate over these past five years. The stock is currently selling for $38.60 a share. The risk-free rate is 4 percent and the market risk premium is 8 percent. What is your best estimate of Miller's cost of equity if their beta is 1.22? The Miller Co. has paid increasing dividends of $.54, $.58, $.62, $.67, and $.72 a share over the past five years, respectively. The firm estimates that future increases in their dividends will be comparable to the arithmetic average growth rate over these past five years. The stock is currently selling for $38.60 a share. The risk-free rate is 4 percent and the market risk premium is 8 percent. What is your best estimate of Miller's cost of equity if their beta is 1.22?

Answer rating: 100% (QA)

To calculate Miller Cos cost of equity we can use the capital asset pricing model CAPM Cost of Equit... View the full answer