Calculation of Cost of Equity
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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?
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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 ...
Purchase this Solution
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