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Medical Associates is a large fopprofit group practice. Its dividends are expected to grow at a constant rate of 7 percent per year into the...

This question was created from Finance- Chapter 09 Problems Kacee.xlsx https://www.coursehero.com/file/30308017/Finance-Chapter-09-Problems-Kaceexlsx/

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What is the cost of equity estimate according to the CAPM?

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Medicalflssuciates is alarge foImefit grunp praciice. Its dividends are expected to grow atacunstant
rate of 2? percent per yearintn tllefnreseeahle future. Thefirm‘s last dividend {Dill} was $2, and its
current stock price is $23.Thefirm's beta coefficiem is 1.6; dle rate of retllrnonIEIll—year T—bunds is 9
percent; andtheexpectedratenhemrnnnihemflrket,astepnrtedhyalargefinancialsnficesfirn;is
Bpet'cent.Thefirm'stargetcapitalstnictuiecallsfnrfiflpucmldebtfmmtcingflleinterestrate
requirednn the business's new dehtis 1|] percentand itstaxrateisdflpercent.

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