Ginger Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 4.7 percent. The most recent stock price for the company is $64.                                         a. Calculate the cost of equity using the DGM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
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Chapter16: Financial Statement Analysis
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Ginger Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 4.7 percent. The most recent stock price for the company is $64.
                                       
a. Calculate the cost of equity using the DGM method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)        
b. Calculate the cost of equity using the SML method. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)        
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