Goetzmann Industries stock has a beta of 1.2. The company just paid a dividend of $.80, and the dividends are expected to grow at 5 percent. The expected return of the market is 13 percent, and Treasury bills are yielding 6 percent. The most recent stock price for Goetzmann is $53. a. Calculate the cost of equity using the DCF 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?

29. Calculating the Cost of Equity. Goetzmann Industries stock has a

beta of 1.2. The company just paid a dividend of $.80, and the dividends

are expected to grow at 5 percent. The expected return of the market is

13 percent, and Treasury bills are yielding 6 percent. The most recent

stock price for Goetzmann is $53. a. Calculate the cost of equity

using the DCF 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?

### Recently Asked Questions

- a: What is the role of the central bank and commercial banks in the process of money multiplication? (2 marks) b: What do you think happens to the money

- Let X ∼ N(μ,ψ2) and K be a constant. Calculate E(max{K – X, 0}). Hint Use (K – X) = (K – μ) – (X – μ).

- I want get the answer for this old exam with more explanation