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Rossdale Co. stock currently sells for $68.91 per share and has a beta of .88. The...

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Finance

Rossdale Co. stock currently sells for $68.91 per share and hasa beta of .88. The market risk premium is 7.10 percent and therisk-free rate is 2.91 percent annually. The company just paid adividend of $3.57 per share, which it has pledged to increase at anannual rate of 3.25 percent indefinitely. What is your bestestimate of the company's cost of equity?

Multiple Choice

  • 9.56%

  • 8.08%

  • 8.88%

  • 7.74%

Answer & Explanation Solved by verified expert
3.7 Ratings (530 Votes)
The best estimate of the companys cost of equity The best estimate of the companys cost of equity is the average of the cost of equity calculated under CAPM Approach and the Dividend Discount Model Cost    See Answer
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Transcribed Image Text

Rossdale Co. stock currently sells for $68.91 per share and hasa beta of .88. The market risk premium is 7.10 percent and therisk-free rate is 2.91 percent annually. The company just paid adividend of $3.57 per share, which it has pledged to increase at anannual rate of 3.25 percent indefinitely. What is your bestestimate of the company's cost of equity?Multiple Choice9.56%8.08%8.88%7.74%

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