Stock in ABC Industries has a beta of .92. The market risk premium is 7.2 percen

Question

Stock in ABC Industries has a beta of .92. The market risk premium is 7.2 percent, and T-bills are currently yielding 4.2 percent. ABC most recent dividend was $2.10 per share, and dividends are expected to grow at a 5.2 percent annual rate indefinitely.

If the stock sells for $43 per share, what is your best estimate of ABC cost of equity?

Stock in ABC Industries has a beta of .92. The market risk premium is 7.2 percent, and T-bills are currently yielding 4.2 percent. ABC most recent dividend was $2.10 per share, and dividends are expected to grow at a 5.2 percent annual rate indefinitely.

Explanation / Answer

"Stock in ABC Industries has a beta of .92. The market risk premium is 7.2 percent, and T-bills are currently yielding 4.2 percent. ABC most recent dividend was $2.10 per share, and dividends are expected to grow at a 5.2 percent annual rate indefinitely.

If the stock sells for $43 per share, what is your best estimate of CDB

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