Stock in Country Road Industries Has a Beta of 1

question 70

Multiple Choice

Stock in Country Road Industries has a beta of 1.62. The market risk premium is 8.2 percent while T-bills are currently yielding 2.9 percent. Country Road's last paid annual dividend was $1.87 per share and dividends are expected to grow at an annual rate of 3.8 percent indefinitely. The stock sells for $25 a share. What is the estimated cost of equity using the average return of the CAPM and the dividend discount model?

• A) 13.87 percent
• B) 14.06 percent
• C) 14.23 percent
• D) 13.38 percent
• E) 14.50 percent

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