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. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

DDM method

%

b.	Calculate the cost of equity using the SML method. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

SML method

%

Answer 1

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