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Solve EITHER “A” or “B”. Make sure to indicate which problem…
Solve EITHER “A” or “B”. Make sure to indicate which problem you are solving……i.e. “A” or “B”! Option A: Guru Tech Inc. has stock that just paid a dividend of $10. This firm’s beta is estimated to be 1.2. Due to the firm’s maturity, its growth is estimated to be 8%. If the S&P 500 is currently returning 12% and Treasury bonds are returning 2%, what is this firm’s after-tax cost of equity? Assume a tax rate of 40%. (2) —————————————————————-OR—————————————————————————————— Option B: Houston Technology’s beta is estimated to be 1.4. The firm’s stock is expected to pay a dividend of $5 at the end of this year and is currently selling for $65. The S&P 500 is currently returning 14%. If the firm expects constant growth in the future of 8%, what is the firm’s after-tax cost of equity? Assume a tax rate of 40%. (2)
Solve EITHER “A” or “B”. Make sure to indicate which problem…
Questions
Sоlve EITHER "A" оr "B". Mаke sure tо indicаte which problem you аre solving......i.e. "A" or "B"! Option A: Guru Tech Inc. has stock that just paid a dividend of $10. This firm’s beta is estimated to be 1.2. Due to the firm’s maturity, its growth is estimated to be 8%. If the S&P 500 is currently returning 12% and Treasury bonds are returning 2%, what is this firm’s after-tax cost of equity? Assume a tax rate of 40%. (2) ----------------------------------------------------------------OR------------------------------------------------------------------------------------------ Option B: Houston Technology’s beta is estimated to be 1.4. The firm’s stock is expected to pay a dividend of $5 at the end of this year and is currently selling for $65. The S&P 500 is currently returning 14%. If the firm expects constant growth in the future of 8%, what is the firm’s after-tax cost of equity? Assume a tax rate of 40%. (2)