# Calculating beta, RR and COE

Please provide detailed working for the following problems.

1. Heks stock has a beta of 1.50, its required return is 14% and the risk -free rate is 5.00% what is the required rate of return of the stock market (hint first find the market risk premium)

My answer is 10.50%

2. The company last dividend was $1.00. its dividend growth rate is expected to constant at 15% for 2 years, after which dividends are expected to grow at a rate of 10% forever. The company's required return (RS) is 12%

What is Company current stock price?

My answer to this question is $60.07

3.

Assume that Beth Inc hired you as a consultant to help it estimate the cost of capital. You have been provided with the following data D0 = $1.20; P0 = $4000, and g=7% (constant) based on the DCF approach, what is Beth's cost of equity from retained earnings?

My answer is 10.54%

Thank you

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#### Solution Preview

Beta: 1.5

Risk Free Rate: 5%

Required Return: 14%

Market Risk Premium: 6%

REQUIRED RETURN ON MARKET: 11.00%

Last Dividend: $1

Short-run Growth: ...

#### Solution Summary

This solution helps with questions about capital budgeting.