Fill This Form To Receive Instant Help

#### The earnings, dividends, and stock price of Shelby Inc

###### Finance

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 8% per year in the future. Shelby's common stock sells for \$21 per share, its last dividend was \$1.00, and the company will pay a dividend of \$1.08 at the end of the current year.
a. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. 11.4 e % b. If the firm's beta is 1.5, the risk-free rate is 9%, and the expected return on the market is 12%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. 12
c. If the firm's bonds earn a return of 10%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. 13
d. On the basis of the results of parts a-c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. 12.71 'k4.) %

## 5.94 USD

### Option 2

#### rated 5 stars

Purchased 8 times

Completion Status 100%