Ask Question
BusinessBusiness
11 February, 12:39

Haulsee Inc. pays no dividend currently but is expected to start paying a small dividend next year. The 5-year-old firm has a beta of 1.25 and current earnings of $0.90 per share. The current Treasury bill rate is 6.10%, and the market risk premium is 8.8%. Determine Haulsee's cost of equity if the firm's tax rate is 40%.

+4
Answers (1)
  1. 11 February, 12:47
    0
    17.10%

    Explanation:

    The computation of the cost of equity is shown below:

    In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

    Expected rate of return = Risk-free rate of return + Beta * (Market rate of return - Risk-free rate of return)

    = 6.10% + 1.25 * 8.8%

    = 6.10% + 11%

    = 17.10%

    The (Market rate of return - Risk-free rate of return) is also known as market risk premium and the same is applied.

    All other information which is given is not relevant. Hence, ignored it
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Haulsee Inc. pays no dividend currently but is expected to start paying a small dividend next year. The 5-year-old firm has a beta of 1.25 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
You can invest in taxable bonds that are paying a yield of 8.9 percent or a municipal bond paying a yield of 7.15 percent. Assume your marginal tax rate is 21 percent. Which security should you buy
Answers (1)
One behavioral factor that must be considered when responsibilities are assigned to managers is A. Managers should be held responsible for only actual revenues and actual costs and not for standard revenues or standard costs. B.
Answers (1)
Sports Medicine, Inc., offers two types of physical exams for students: the basic physical and the extended physical. The charge for the basic physical is $ 95 , while the charge for the extended physical is $ 150.
Answers (1)
Monico invests $9,000 at 9% simple interest for 1 year. How much is in the account at the end of the 1 year period?
Answers (2)
In 1916, the Ford Motor Company produced 500,000 Model T Fords at a price of $440. The company made a profit of $60,000,000 that year.
Answers (1)
New Questions in Business
Adamson Company manufactures four lines of garden tools. As a result of an activity analysis, the accounting department has identified eight activity cost pools.
Answers (1)
Compute the 2019 Federal income tax liability and the marginal and effective tax rates in each of the following independent cases. Click here to access the 2019 tax rate schedule. If required, round the tax liability the nearest dollar.
Answers (1)
For a portfolio of 40 randomly selected stocks, which of the following is most likely to be true? a. The beta of the portfolio is less than the weighted average of the betas of the individual stocks. b.
Answers (1)
What publication can give you an idea of how administrative jobs are going to change in the future? A: Office Pro B: Occupational Outlook Handbook C: From 9 to 5 D: The Executary
Answers (1)
At a four-way stop, if two cars arrive at the intersection at the same time: A) the larger car has the right of way B) the vehicle on the right yields to the vehicle on the left C) the smaller car has the right of way D) the vehicle on the left
Answers (1)
Home » Business » Haulsee Inc. pays no dividend currently but is expected to start paying a small dividend next year. The 5-year-old firm has a beta of 1.25 and current earnings of $0.90 per share. The current Treasury bill rate is 6.
Sign Up Forgot Password?