Reliable Electric is a regulated public utility, and it is expected to provide a steady growth of dividends of 5 percent per year for the indefinite future. Its last dividend was $5/share; the stock sold for $60 per share just after the dividend was paid. What is the company's cost of equity?

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Using the dividend discount model, the cost of equity is given as:
Cost of equity = D1/Mp + ...

Solution Summary

This solution explains how to calculate the cost of equity in a clear and concise manner. The dividend discount model is used for solving and all associated variables are explained.

A company has a debt-equity ratio of 1.5. Its WACC is 14%, and its cost of debt is 9%. There is no corporate tax.
A. What is the company's cost of equity capital?
B. What would thecost of equity be if the debt-equity ratio were 1.0? What if it were 0.5? What is it were 0?

Scenario: McCoy, Inc., has equity with a market value of $40 million and debt with a market value of $20 million. Thecost of the debt is 6% semi-annually. Treasury bills that mature in one year field 5% per annum, and the expected return on the market portfolio over the next is 15%. The beta of McCoy's equity is 0.8. The firm p

A firm has a debt-to-equity ration of 1. Its (levered) cost of equity is 16% and its cost of debt is 8%. If there were no taxes, What would be its cost of equity if the debt-to-equity ratio were zero?
A company has a debt to total value ratio of 0.5 . Thecost of debt is 8% and that of unlevered equity is 12%. Calculate the

A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?
a. 10%
b. 15%
c. 18%
d. 21%
e. none of the above

The firm has 7,000,000 shares of common equity outstanding which currently trade on the NYSE for $43.50 per share. The beta of the stock is 1.3. The prevailing risk free rate is 4.2%, and the required return on the firm's equity is 16%.
1. What is the market value of theequity?
2. What is theCost of Equity (assuming no

David Ortiz Motors has a target capital structure of 40 percent debt and 60 percent equity. The yield to maturity on the company's outstanding bonds is 9 percent, and the company's tax rate is 40 percent. Ortiz's CFO has calculated the company's WACC as 9.6 percent. What is the company's cost of equity capital?

Please tell me how to find K given the parameters in the problem for #9.50. You can see how I'm trying to do it, but I can't figure out what to plug in for Cd and Ce from what's given.

How do you calculate thecost of debt and cost of equity if you are only given the beta, debt/equity proportion, and the after tax interest rate?
Please see attached for more details.
Use a spreadsheet to calculate thecost of debt, cost of equity (using CAPM), and weighted marginal cost of capital for each level of debt

1) A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?
2) Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is thecost o