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Mackenzie Company has a price of $ 31 and will issue a dividend of $ 2.00...

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Finance

Mackenzie Company has a price of $ 31 and will issue a dividendof $ 2.00 next year. It has a beta of 1.5 the? risk-free rate is5.7 % and the market risk premium is estimated to be 4.8 %

a. Estimate the equity cost of capital for Mackenzie.

b. Under the? CGDM, at what rate do you need to expect?Mackenzie's dividends to grow to get the same equity cost ofcapital as in part ?(a?)?

Answer & Explanation Solved by verified expert
4.1 Ratings (830 Votes)
aEquity cost of capital for Mackenzie As per Capital Asset Pricing Model CAPM The cost of common equity is computed by using the following equation The    See Answer
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Transcribed Image Text

Mackenzie Company has a price of $ 31 and will issue a dividendof $ 2.00 next year. It has a beta of 1.5 the? risk-free rate is5.7 % and the market risk premium is estimated to be 4.8 %a. Estimate the equity cost of capital for Mackenzie.b. Under the? CGDM, at what rate do you need to expect?Mackenzie's dividends to grow to get the same equity cost ofcapital as in part ?(a?)?

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