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    Calculating beta, RR and COE

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    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

    © BrainMass Inc. brainmass.com June 3, 2020, 9:16 pm ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/calculating-beta-rr-coe-174133

    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.

    $2.19

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