The stock of ZZ Ltd. has a beta of 1.5. The company just paid a dividend...
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The stock of ZZ Ltd. has a beta of 1.5. The company just paid a dividend of $1.0, and the dividend is expected to grow at 5% per year, indefinitely. The expected market retum is 10%. and the risk-free is 5%. The most recent stock price for ZZ is $50. a. Calculate the cost of equity using the DDM method. b. Calculate the cost of equity using the SML method. c. Why are your estimates (in [a] and [b]) are so different? The stock of ZZ Ltd. has a beta of 1.5. The company just paid a dividend of $1.0, and the dividend is expected to grow at 5% per year, indefinitely. The expected market retum is 10%. and the risk-free is 5%. The most recent stock price for ZZ is $50. a. Calculate the cost of equity using the DDM method. b. Calculate the cost of equity using the SML method. c. Why are your estimates (in [a] and [b]) are so different?
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a Given Dividend D0 1 Growth g 5 Stock price P 50 Solution Using DDM method Pr... View the full answer
Related Book For
Financial Management Theory and Practice
ISBN: 978-1305632295
15th edition
Authors: Eugene F. Brigham, Michael C. Ehrhardt
Posted Date:
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