Qd 14. The cost of equity using the discounted cash flow (or dividend growth) approachKirby Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts projectthe firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what isKirby's cost of internal equity?O 12.31%O 17.50%O 13.61%O 12.96%Estimating growth ratesIt is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach.In general, there are three available methods to generate such an estimate:• Carry forward a historical realized growth rate, and apply it to the future.• Locate and apply an expected future growth rate prepared and published by security analysts.• Use the retention growth model.Suppose Kirby is currently distributing 50% of its earnings in the form of cash dividends. It has also historically generated an average return on equity(ROE) of 8%. Kirby's estimated growth rate is▼ %.Save & ContinueContinue without saving

The value of stock can be found as the present value of the dividends and present value of growth…

Kirby Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project he firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is irby's cost of internal equity? 12.31% 17.50% 13.61% 12.96% stimating growth rates

Kirby Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project he firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is irby's cost of internal equity? 12.31% 17.50% 13.61% 12.96% stimating growth rates

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 10P

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