The weighted average cost of capital (WACC) involves the cost of common stock. The following questions are used to estim

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The Weighted Average Cost Of Capital Wacc Involves The Cost Of Common Stock The Following Questions Are Used To Estim 1 (53.59 KiB) Viewed 38 times

The weighted average cost of capital (WACC) involves the cost of common stock. The following questions are used to estimate the cost of equity through the Capital Asset Pricing Model (CAPM) and the dividend growth model. you have information on the following stocks: stock market risk premium B AL Bank 6.50% 0.8 KT Bank 6.50% 1.6 Such as the Capital Asset Pricing Model (Capital Asset Pricing Model CAPM) is effective, and now the risk-free rate of return is 4.6%. Calculate the expected returns for the above two stocks separately. (8 points) III b. L1 Bank was listed in Hong Kong last year, and its share price can be reflected in CAPM. Also, you get information on L1 stock expected return of 18.2%, dividend for the year is $5.6, expected annual dividend growth rate of 2%. Try to calculate the share price of L1. (8 points) - draw the three stocks AL, KT and L1 on the Securities Market Line (SML) respectively Combining the information in (a) and (b), which stock would you choose? Please explain your choice. (12 points)