Golden State Home Health Inc is a large California based for profit home health agency. Its dividends are expected to grow at a constant rate of 5% per year into the foreseeable future. The firms last dividend (Do) was $1 and its current stock return price is $10. The firm’s beta coefficient is 1.2; the rate of return on 20 year T-bonds currently is 8%. And the expected rate of return on the market, as reported by a large financial services firm is 14%. Golden State target capital structure calls for 60% debt financing; the interest rate is 30%. ,A. What are the firms cost of equity estimate according to the discounted cash flow (DCF) method?,B. What is the cost of equity estimate according to the Capital Asset Pricing Model?,C. On the basis to your answers to part A and part B, what would be your final estimate for the firm’s cost of equity?,D. What is your estimate for the firm’s corporate cost of capital?,
Regent Papers is a library of common essays on high school, college, undergraduate and postgraduate topics. We have collected top papers from various institution, students and professors. The papers are based on common essay topics in all subjects.