A Firm with a Beta of 1

question 72

Multiple Choice

A firm with a beta of 1.22 just paid its annual dividend of $5.64 a share. The dividends increase at a rate of 2% annually. The risk-free rate is 3.5%, the market rate of return is 12.4%, and the dividend discount rate is 11.6%. What is the best estimate of the firm's cost of equity if the firm's stock currently sells for $60 a share using an average of methods?

• A) 12.97%
• B) 14.33%
• C) 11.60%
• D)13.38%

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Definitions:

Medical Jargon

Specialized language used by healthcare professionals that can be confusing or incomprehensible to those outside the medical community.

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