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# Calculating Cost of Equity: Stock in Country Road Industries has a beta of . The market risk premium is 8%, and T-bills are currently yielding 5%....

Calculating Cost of Equity:
Stock in Country Road Industries has a beta of .85. The market risk premium is 8%, and T-bills are currently yielding 5%. The company's most recent dividend was \$1.60 per share, and the dividends are expected to grow at a 6% annual rate indefinitely. If the stock sells for \$37 per share, what is your best estimate of the company's cost of equity?

Solution:Beta = 0.85
T-bills yield = 5%
Recent dividend D0 = \$1.6 per share
Growth rate = 6%
Price per share = \$37 per share
Computation of company's cost of equity (CAPM...

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