Stock in Country Road Industries Has a Beta of 0

question 46

Multiple Choice

Stock in Country Road Industries has a beta of 0.97. The market risk premium is 10 percent while T-bills are currently yielding 5.5 percent. Country Road's most recent dividend was $1.70 per share, and dividends are expected to grow at a 7 percent annual rate indefinitely. The stock sells for $32 a share. What is the estimated cost of equity using the average of the CAPM approach and the dividend discount approach?

• A)13.94 percent
• B)14.06 percent
• C)14.21 percent
• D)14.38 percent
• E)14.50 percent

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Definitions:

Monoecious

Having male and female reproductive parts in separate flowers or cones on the same plant; compare with dioecious.

Homosporous

Referring to plants that produce spores of one kind only, which are typically bisexual and can develop into a male or female gametophyte.

Eudicot Seeds

Eudicot Seeds belong to one of the two major groups of flowering plants, characterized by having two seed leaves, or cotyledons, upon germination, among other distinct structural features.

Nutritive Material

Substances that provide nourishment essential for growth and the maintenance of life.