Floyd Industries.docx - Floyd Industries stock has a beta of 1.3 The company just paid a dividend of $.95 and the dividends are expected to grow at 4.5

Floyd Industries.docx - Floyd Industries stock has a beta...

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Floyd Industries stock has a beta of 1.3. The company just paid a dividend of $.95, and the dividends are expected to grow at 4.5 per year. The expected return on the market is 11 percent, and Treasury bills are yielding 4.3 percent. The most recent stock price for Floyd is $64. a. Calculate the cost of equity using the DDM method. b. Calculate the cost of equity using the SML method. c. Why do you think your estimates in (a) and (b) are so different? a) DDM Method Cost of equity= Div /P + g Div=dividend per share to be received next year = $0.95+ ($0.95*4.5%)
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  • Fall '15
  • 6%, 11 percent, 4.3 percent, Floyd Industries

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