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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Definitions:

Salvage Value

The estimated remaining valuation of an asset after its effective life period.

Salvage Value

The assessed remaining value of an asset following the completion of its usability period.

Cash Operating Costs

Expenses related directly to the operation of a business, excluding non-cash expenses like depreciation.

Automating

The process of using technology or machinery to perform tasks with minimal human intervention.