Question

Floyd Industries stock has a beta of 1.2. The company just paid a dividend of $.50, and the dividends are expected to grow at 6 percent per year. The expected return on the market is 11 percent, and Treasury bills are yielding 4.6 percent. The most recent stock price for Floyd is $63. |

a. |
Calculate the cost of equity using the DDM method. |

DDM method | % |

b. |
Calculate the cost of equity using the SML method. |

SML method | % |

Answer #1

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