Business, 21.06.2021 16:30 sbhunsaker9025
Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 36.0%, and the current dividend yield is 8.00%. Its beta is 1.32, the market risk premium is 14.00%, and the risk-free rate is 2.80%.
Required:
a. Use the CAPM to estimate the firm’s cost of equity. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
b. Now use the constant growth model to estimate the cost of equity. (Do not round intermediate calculations. Enter your answer as a whole percent.)
c. Which of the two estimates is more reasonable?
Answers: 2
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Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. I...
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