Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems.
QUESTION
Bunkhouse Electronics is a recently incorporated firm that makes electronic
entertainment systems. Its earnings and dividends have been growing at a rate
of 30 percent, and the current dividend yield is 2 percent. Its beta is 1.2,
the market risk premium is 8 percent, and the risk-free rate is 4 percent.
a. calculate two
estimates of the firmâs cost of equity.b. which
estimate seems more reasonable to you> Why?
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