National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 per share. The dividend growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of equity using the average return of the CAPM and the dividend discount model?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 per share. The dividend
growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of
equity using the average return of the CAPM and the dividend discount model?
Transcribed Image Text:National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 per share. The dividend growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of equity using the average return of the CAPM and the dividend discount model?
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