Fundamentals of Financial Management (Concise 6th Edition)

300 Part 3 Financial Assets dividend growth rate? Another way to obtain estimates of dividend growth rates is to look at analyst ...

Chapter 9 Stocks and Their Valuation 301 APPENDIX 9A Stock Market Equilibrium Recall that rX, the required return on Stock X, ca ...

302 Part 3 Financial Assets This value is plotted on Figure 9A-1 as Point X, which is below the SML. Because the expected rate o ...

Chapter 9 Stocks and Their Valuation 303 (^1) A price change of this magnitude is by no means rare. The prices of many stocks do ...

304 Part 3 Financial Assets EQUILIBRIUM STOCK PRICE The risk-free rate of return, rRF, is 6%; the required rate of return on the ...

I N V E S T I N G I N L O N G!T E R M A S S E T S : C A P I T A L B U D G E T I N G 1 0 The Cost of Capital 1 1 The Basics of Ca ...

C r e a t i n g Va l u e a t GE (^10) The Cost of Capital CHAPTER 306 © STAN HONDA/AFP/GETTY IMAGES General Electric (GE) is one ...

In the last four chapters, we explained how risk in! uences prices and required rates of return on bonds and stocks. A " rm’s pr ...

PART 4 Investing in Long-Term Assets: Capital Budgeting plans to use a small amount of preferred in the future, and its common e ...

Chapter 10 The Cost of Capital 309 53% common equity; and it plans to raise capital in those proportions in the future. Therefor ...

310 Part 4 Investing in Long-Term Assets: Capital Budgeting The target proportions of debt (wd), preferred stock (wp), and commo ...

Chapter 10 The Cost of Capital 311 to be called) on their currently outstanding debt (see Chapter 7).^6 However, the after-tax c ...

312 Part 4 Investing in Long-Term Assets: Capital Budgeting 10-4 COST OF PREFERRED STOCK, r p The component cost of preferred st ...

Chapter 10 The Cost of Capital 313 current year’s earnings and (2) by issuing new common stock.^11 We use the symbol rs to desig ...

314 Part 4 Investing in Long-Term Assets: Capital Budgeting 10-5a The CAPM Approach The most widely used method for estimating t ...

Chapter 10 The Cost of Capital 315 10-5b Bond-Yield-plus-Risk-Premium Approach In situations where reliable inputs for the CAPM ...

316 Part 4 Investing in Long-Term Assets: Capital Budgeting We can solve for rs to obtain the required rate of return on common ...

Chapter 10 The Cost of Capital 317 rather than paying them out as dividends. Put another way, since investors are thought to hav ...

318 Part 4 Investing in Long-Term Assets: Capital Budgeting 10-6 COST OF NEW COMMON STOCK, r e Companies generally use an invest ...

Chapter 10 The Cost of Capital 319 Here F is the percentage! otation cost required to sell the new stock, so P 0 (1 " F) is the ...