Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

Question

Question

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market price of $17.23 and a beta of .93. The return on the U.S. Treasury bill is 3.1 percent and the market risk premium is 7.6 percent. What is the cost of equity?

9.98 percent
10.04 percent
10.17 percent
10.30 percent
10.45 percent

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

ER = Risk free rate + Beta * Market Risk Premium

= 3.1 + 0.93 * 7.6

= 3.1 + 7.07

ER = 10.17%

Cost of Equity = 10.17%

Option C is correct

Add a comment

Answer 2

Similar Homework Help Questions

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market price of $17.23 and a beta of .93. The return on the U.S. Treasury bill is 3.1 percent and the market risk premium is 7.6 percent. What is the cost of equity?
Southern Home Cookin' just paid its annual dividend of $.70 a share. The stock has a...

Southern Home Cookin' just paid its annual dividend of $.70 a share. The stock has a market price of $35 and a beta of 0.9. The return on the U.S. Treasury bill is 4 percent and the market risk premium is 13 percent. What is the cost of equity? rev: 09_04_2018_QC_CS-136177 19.30 percent 11.74 percent 13.17 percent 17.42 percent 15.70 percent
16 UMD Cookin' just paid its annual dividend of so. Just paid its annual dividend of...

16 UMD Cookin' just paid its annual dividend of so. Just paid its annual dividend of $0.65 a share. The stock has a market price 15 and a beta of 1.12. The return the US Treasury bill is 2.5% and the market premium is 6.8%. What is the cost of equity? ته هن و 9.98% 10.04% 10.12% 10.37% 10.45% True or False, in CAPM, the Beta ratio is defined as the standard deviation of the returns of a given security...

Gentleman Gym’s common stock just paid its annual dividend of $3 per share, and it is...

Gentleman Gym’s common stock just paid its annual dividend of $3 per share, and it is widely expected that the dividend will increase by 5 percent per year indefinitely. The risk-free rate is 3 percent and the market risk premium is 6 percent. (a) What price should Gentleman Gym’s common stock sell for today if it has a βequity of 2.0? (b) How would your answer change if Gentleman Gym’s βequity were 1.5?
8-40 Exercise U Bhd (UB) has just paid a dividend of RMO.50 per share. The company's return on equity (ROE) is 13 percent and its management has planned to retain 20 percent of the earnings fo...

8-40 Exercise U Bhd (UB) has just paid a dividend of RMO.50 per share. The company's return on equity (ROE) is 13 percent and its management has planned to retain 20 percent of the earnings for investment ina new capital project that has a project beta of 1.6. Three-month T-bill rate is 6 percent and market risk premium is 7 percent. What is the fair market price for UB's ordinary shares? 8-41 8-40 Exercise U Bhd (UB) has just paid...
12) Albert's recently paid its annual dividend of $1.98 per share. At that time, the firm...

12) Albert's recently paid its annual dividend of $1.98 per share. At that time, the firm announced that all future dividends will be increased by 2.2 percent annually. What is the firm's cost of equity if the stock is curently selling for $28.40 a share? A) 11.32 percent В) 9.33 реrcent C) 11.08 percent D) 10.06 percent E) 10.47 percent 12) 13) 13) The cost of equity for RJ Corporation is 8.4 percent and the debt-equity ratio is .6. The...

1. Excelor stock is expected to pay $2.80 per share as its next annual dividend. The...

1. Excelor stock is expected to pay $2.80 per share as its next annual dividend. The firm has a policy of increasing the dividend by 10.0 percent annually. The stock has a market price of $13.61 and a beta of 2.6. The market risk premium is 8.54 percent and the risk-free rate is 4.80 percent. What is the cost of equity? 27.71 percent 28.14 percent 29.18 percent 28.79 percent 2. The 13.50 percent preferred stock of Ajax Unlimited is selling...
The Southern Company (SO) has just paid an annual dividend of $3 per share. If the...

The Southern Company (SO) has just paid an annual dividend of $3 per share. If the expected growth rate for Southern Co. is 10% and your required rated of return is 16%, how much are you willing to pay for this stock? 1)$55 2)$50 3)$46.50 4)$52.50
A company has just paid a dividend of $ 3 per share, D0=$ 3 . It...

A company has just paid a dividend of $ 3 per share, D0=$ 3 . It is estimated that the company's dividend will grow at a rate of 18 % percent per year for the next 2 years, then the dividend will grow at a constant rate of 7 % thereafter. The company's stock has a beta equal to 1.4, the risk-free rate is 4.5 percent, and the market risk premium is 4 percent. What is your estimate of the...

Kelso's just paid an annual dividend of $1.20 a share. The market price of the stock...

Kelso's just paid an annual dividend of $1.20 a share. The market price of the stock is $26.60 and the growth rate is 4%. What is the firm's cost of equity? A. 8.38 B. 8.51 C. 8.57 D.8.69 E. 8.74

Southern Bakeries just paid its annual dividend of $.48 a share. The stock has a market...

Homework Answers