4. value: 7.72 points Berta Industries stock has a beta of 1.20. The company jus

Question

4.

value:
7.72 points

Berta Industries stock has a beta of 1.20. The company just paid a dividend of $0.50, and the dividends are expected to grow at 6 percent. The expected return on the market is 11 percent, and Treasury bills are yielding 5.6 percent. The most recent stock price for Berta is $73.

Calculate the cost of equity using the DCF method. (Round your answer to 2 decimal places. (e.g., 32.16))

Calculate the cost of equity using the SML method. (Round your answer to 2 decimal places. (e.g., 32.16))

Berta Industries stock has a beta of 1.20. The company just paid a dividend of $0.50, and the dividends are expected to grow at 6 percent. The expected return on the market is 11 percent, and Treasury bills are yielding 5.6 percent. The most recent stock price for Berta is $73.

Explanation / Answer

cost of equity is (under DCF) around 8.34% and under SML method it is 7.36%

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