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Calculate two estimates of the firms cost of equity

Problem:

Cost of Equity. Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 30 percent, and the current dividend yield is 2 percent. It beta is 1.2, the market risk premium is 8 percent, and the risk-free rate is 4 percent.

Q1. Calculate two estimates of the firm's cost of equity?

Q2. Which estimate seems more reasonable to you? Why?

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Finance Basics: Calculate two estimates of the firms cost of equity

Reference No:- TGS02045283

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