Explore BrainMass

# Calculating beta, RR and COE

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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)

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?

Thank you

#### Solution Preview

Beta: 1.5
Risk Free Rate: 5%
Required Return: 14%