Rosie's Grill Has a Beta of 1

question 354

Multiple Choice

Rosie's Grill has a beta of 1.2, a stock price of $26 and an expected annual dividend of $1.30 a share, which is to be paid next month. The dividend growth rate is 4 %. The market has a 10 % rate of return and a risk premium of 6 %. What is the average expected cost of equity for Rosie's Grill?

• A) 9.20 %
• B) 9.70 %
• C) 10.10 %
• D) 10.30 %
• E) 11.40 %

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