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# Estimating cost of equity using the dividend growth model

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Please help me figure out how to do this practice assignment. I only have 3 hours to learn it before I take an exam that covers similar material. Thanks. The questions are about cost of equity, CAPM and bond premium method.

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Pg 389
(9-10)
Cost of Equity
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby's common stock sells for \$23 per share, its last dividend was \$2.00, and the company will pay a dividend of \$2.14 at the end of the ...

#### Solution Summary

Solution helps in estimating Cost of equity, CAPM and bond premium method.

\$2.19

## Cost equity estimates

Estimate the cost of equity (expressed in percentages or in a decimal format) or the rate of return that Accuray's shareholders 'require'. Use the Capital Asset Pricing Model (CAPM) in order to estimate the rate of return that shareholders require on their investment. Show all calculations.

How would you go about finding the cost of equity using the dividend growth model or the arbitrage pricing theory for Accuray? Explain how you would go about doing these calculations and explain what kind of additional information you might need.
No equations/calculations needed for this part.

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