The Cracker Barrel has a beta of 0.98,a dividend growth rate of 3.2 percent,a stock price of $33 a share,and an expected annual dividend of $1.06 per share next year.The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent.What is the firm's cost of equity?

Question

Quizplus · Accepted Answer

R_E = 0.037 + 0.98(0.112 - 0.037) = 0.1105R_E = ($1.06/$33) + 0.032 = 0.064121Average R_E = (0.1105 + 0.064121)/2 = 8.73 percent

The Cracker Barrel Has a Beta of 0