Question

The current price of company’s preferred stock on the stock market is €3.6. The preference share has a 20% dividend yield upon a par value of €1. In case of issuance of new preferred share capital, the issue and disposal costs will be €0.30 per share. The current market price of company’s common stock on the stock market is €3.9. The company’s most recent dividend (D₀) was €0.24 per share and dividends are expected to grow at a steady 2% annual rate for the foreseeable future. The beta coefficient of company is 1.6, the long-term government bond offers investors a yield of 4%, and the market risk premium is 2%.

What is the cost of company’s common equity capital using the Capital Asset Pricing (CAPM) model?

Select one:

a. 6.5%

b. 6.9%

c. 7.2%

d. 8.1%

e. 7.9%

Question 17

Question text

What is the cost of company’s preferred share capital (two decimals, no rounding)?

Select one:

a. 8.82%

b. 8.23%

c. 6.81%

d. 7.65%

e. 6.06%

Question 18

Not yet answered

What is the cost of company’s common equity capital using the Dividend Discount Model (DDM) model (two decimals, no rounding):

Select one:

a. 4.52%

b. 7.95%

c. 3.98%

d. 8.27%

e. 6.01%

Answer 1

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