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Cost of Equity

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The earnings, dividends, and stock price of Carpetto Tech Inc, are expected tp grow at 7 % per year in the future. Carpetto's common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend for $2.14 at the end of the current year.

A.Using the discounted cash flow approach, shat is its cost of equity?

b. If the firm's beta is 1.6, the risk free rate is 9 %, and the expected return on the market is 13%, what will be the firm's cost of equity using the CAPM approach?

c. If the firm's bond's earn a return a return of 12%, what will rs be suing the bond-yield-plus-risk-premium approach?

d. On the basis of the results of parts a through c, what would you estimate Carpetto's cost of equity to be?

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Cost of equity is investigated.

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A.Using the discounted cash flow approach, that is its cost of equity?

Ke= (DIV1/Po)+g= 16.30%

Div1= Expected dividend per share next year. 2.140

P0= Market price =23
G= growth 7.00%

b. If the firm's beta is 1.6, the risk free ...

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