The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. C

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The Future Earnings Dividends And Common Stock Price Of Callahan Technologies Inc Are Expected To Grow 6 Per Year C 1 (30 KiB) Viewed 57 times

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $26.00 per share; its last dividend was $1.50; and it will pay a $1.59 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the firm's beta is 1.0, the risk-free rate is 8%, and the average return on the market is 12%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % c. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. %
The Evanec Company's next expected dividend, D₁, is $3.04; its growth rate is 6%; and its common stock now sells for $32.00. New stock (external equity) can be sold to net $25.60 per share. a. What is Evanec's cost of retained earnings, rs? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is Evanec's percentage flotation cost, F? Round your answer to two decimal places. F = c. What is Evanec's cost of new common stock, re? Do not round intermediate calculations. Round your answer to two decimal places. re % %
Empire Electric Company (EEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of ra = 10% as long as it finances at its target capital structure, which calls for 45% debt and 55% common equity. Its last dividend (Do) was $2.85, its expected constant growth rate is 6%, and its common stock sells for $27. EEC's tax rate is 25%. Two projects are available: Project A has a rate of return of 15%, and Project B's return is 10%. These two projects are equally risky and about as risky as the firm's existing assets. a. What is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. What is the WACC? Do not round intermediate calculations. Round your answer to two decimal places. -Select- % c. Which projects should Empire accept?