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and the return on retained earnings of 15%. If the discount rate is 14%, find the stock price:The dividend in the first year is 10*0.20=$2Growth rate is (1-0.20)*0.15= 12%P= Div/ (R-g)= 2/(0.14-0.12)= $100
7. Suppose that the Simmons Corporation's common stock has a beta of 1.6. If the risk-free rate is 5% and the market risk premium is 4%, the cost of equity for Simmons' is: 8. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0? 9. Assuming the CAPM or one-factor model holds, what is the cost of equity for a firm if the firm's equity has a beta of 1.2, the risk-free rate of return is 2%, the expected return on the market is 9%, and the return to the company's debt is 7%? 10. The bonds issued by Jensen & Son bear a 6% coupon, payable semiannually. The bond matures in 8 years and has a $1,000 face value. Currently, the bond sells at par. What is the cost of debt? A. 5.87%B. 5.97%C. 6.00%D. 6.09%E. 6.17%