Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. the earnings, dividends, and stock price of shelby

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3%...

60.1K

Verified Solution

Question

Finance

image
The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per year in the future. Shelby's common stock sells for $30.00 per share, Its last dividend was $2.00, and the company will pay a dividend of $2.06 at the end of the current year. a. Using the discounted cash flow approach, what is its cost of equity? Round your answer to two decimal places. % b. If the firm's beta is 0.6, the risk-free rate is 8%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach? Round your answer to two decimal places. % c. If the firm's bonds earn a return of 11%, then what would be your estimate of is using the own-bond- yield-plus-judgmental-risk-premium approach? (Hint: Use the mid-point of the risk premium range.) Round your answer to two decimal places. % d. On the basis of the results of parts a-c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally. Round your answer to two decimal places. %

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Which of the following companies would you expect to have thehighest operating leverage number...

Accounting
Q

Stock Repurchase Bayani Bakery's most recent FCF was $49 million; the FCF is expected to grow at...

Finance
Q

A 2.500×10−2 M solution of NaCl in water is at 20.0∘C. The sample was created by dissolving...

Chemistry
Q

A spaceship of proper length Lp = 500 m moves past a transmitting station at a...

Physics
Q

Compute the quartic interpolating polynomial for the Hermite interpolation problem p(0) = 2, p'(0) = -9 p(1) =...

Advance Math
Q

How would you classify the microorganisms in the figure according to their requirement of oxygen?Aerotolerant...

Biology
Q

Two blocks A and B each having a mass of 480 gm connected by a...

Physics
Q

Find the probability Leave your answer in simplest fractio form A magazine contains fourteen pages...

Geometry
Q

14 Stoichiometry is based on O A pressure OB temperature 0 C molecular weight D...

Basic Math
Q

Consider a function that describes how a particular car's gas mileage depends on its speed....

Basic Math
Q

Following information is available for the year 2020 of ABC SAOG. You are required to...

Accounting
Q

Bluegill Company sells 15,300 units at $420 per unit. Fixed costs are $321,300, and operating...

Accounting