Problem:
If a firm has a beta of 90% and a market risk premium of 7% and T-bills yield 3.5%. The most recent dividend was $1.80 per share and dividends are expected to grow at a 5% annual rate indefinitely.
Requied:
Question: If the stock sells for 47% per share, what is your best estimate of the firm's cost of equity?
Note: Solve the problem and show all work.