Stock in cdb industries has a beta of 95 the market risk, Financial Management

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Stock in cdb industries has a beta of 95 the market risk

Stock in CDB Industries has a beta of .95. The market risk premium is 7 percent, and T-bills are currently yielding 4 percent. CDB’s most recent dividend was $2.40 per share, and dividends are expected to grow at an annual rate of 5 percent indefinitely. The stock sells for $46 per share. ( SHOW WORK )

a) Using the CAPM, what is your estimate of the company's cost of equity?

b) Using the dividend discount model, what is your estimate of the company's cost of equity?

c) What is your best estimate of the company's cost of equity?

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Financial Management: Stock in cdb industries has a beta of 95 the market risk

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