A company's EPS are $2.00 and has a 60% pay-out ratio. Dividends are expected to grow at 7% per year. Its stock beta is 1.2, the risk free rate is 6% and the average return on equity in the market is 12%.
a. What is the firm's cost of equity?
b. What is the most you should be willing to pay for a share of its stock?© BrainMass Inc. brainmass.com October 10, 2019, 4:43 am ad1c9bdddf
A company's EPS are $2.00 and has a 60% pay-out ratio.
a. What is the firm's cost of equity?Ã?
=Risk free rate + Beta * (Return on ...
The solution helps in estimating Cost of Equity.