Calculate the cost of equity calculate the intrinsic value, Financial Management

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Calculate the cost of equity calculate the intrinsic value

Stock HIG recently paid a dividend of $3.50. You expect the company to grow its earnings at 10% for the next three years and to then grow its earnings at 3% thereafter. The firm has a beta of 1.7. Assume an equity risk premium of 6% and a risk free rate of 3%.

a. Calculate the Cost of Equity

b. Calculate the intrinsic value of stock HIG using the two stage dividend discount model.

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Financial Management: Calculate the cost of equity calculate the intrinsic value

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Financial Management: Calculate the cost of equity calculate the intrinsic value

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