Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

9th Edition

ISBN: 9781259277214

Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor

Publisher: McGraw-Hill Education

See similar textbooks

Concept explainers

Dividend Valuation

Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that…

Dividend Discount Model

Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is…

Capital Gains Yield

It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normal…

Stock Valuation

In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.

Videos

Textbook Question

Chapter 12, Problem 5CTCR

DGM Cost of Equity Estimation. What are the advantages of using the dividend growth model (DGM) for determining the cost of equity capital? What are the disadvantages? What specific piece of information do you need to find the cost of equity using this model? What are some of the ways in which you could get an estimate of this number?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 12, Problem 4CTCR

Chapter 12, Problem 6CTCR

Students have asked these similar questions

To estimate the cost of equity we can use the Capital Asset Pricing Model (CAPM) or the Discount Growth Model (DGM). How we can decide which model to use? Explain.

Question: To estimate the cost of equity we can use the Capital Asset Pricing Model (CAPM) or the Discount Growth Model (DGM). How we can decide which model to use? Explain.

What is the estimated cost of equity using thedividend growth approach?

Chapter 12 Solutions

Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

Ch. 12.1 - What is the primary determinant of the cost of...Ch. 12.1 - What is the relationship between the required...Ch. 12.2 - Prob. 12.2ACQ Ch. 12.2 - Prob. 12.2BCQ Ch. 12.3 - Prob. 12.3ACQ Ch. 12.3 - Prob. 12.3BCQ Ch. 12.3 - Prob. 12.3CCQ Ch. 12.4 - Prob. 12.4ACQ Ch. 12.4 - Why do we multiply the cost of debt by (1 TC)...Ch. 12.4 - Under what conditions is it correct to use the...

Ch. 12.5 - Prob. 12.5ACQ Ch. 12.5 - Prob. 12.5BCQ Ch. 12.6 - Prob. 12.6ACQ Ch. 12.6 - Prob. 12.6BCQ Ch. 12 - Section 12.1What are the components used to...Ch. 12 - Prob. 12.2C Ch. 12 - Prob. 12.3C Ch. 12 - Prob. 12.4C Ch. 12 - Section 12.5True or False: Projects should always...Ch. 12 - WACC. On the most basic level, if a firms WACC is...Ch. 12 - Prob. 2CTCR Ch. 12 - Project Risk. If you can borrow all the money you...Ch. 12 - LO4 12.4WACC and Taxes. Why do we use an aftertax...Ch. 12 - DGM Cost of Equity Estimation. What are the...Ch. 12 - Prob. 6CTCR Ch. 12 - Prob. 7CTCR Ch. 12 - Prob. 8CTCR Ch. 12 - Prob. 9CTCR Ch. 12 - Prob. 10CTCR Ch. 12 - Prob. 1QP Ch. 12 - Calculating Cost of Equity. Halestorm Corporations...Ch. 12 - Calculating Cost of Equity. Stock in CDB...Ch. 12 - Estimating the DCF Growth Rate. Suppose Hornsby...Ch. 12 - Prob. 5QP Ch. 12 - LO2 6Calculating Cost of Debt. ICU Window, Inc.,...Ch. 12 - LO2 7Calculating Cost of Debt. Jimmys Cricket Farm...Ch. 12 - Calculating Cost of Debt. For the firm in Problem...Ch. 12 - Calculating WACC. Bargeron Corporation has a...Ch. 12 - Prob. 10QP Ch. 12 - Prob. 11QP Ch. 12 - Book Value versus Market Value. Bonaime, Inc., has...Ch. 12 - Calculating the WACC. In Problem 12, suppose the...Ch. 12 - WACC. Clifford, Inc., has a target debtequity...Ch. 12 - Prob. 15QP Ch. 12 - Finding the WACC. Hankins Corporation has 5.4...Ch. 12 - SML and WACC. An all-equity firm is considering...Ch. 12 - Calculating the WACC. You are given the following...Ch. 12 - Calculating Capital Structure Weights. Liu...Ch. 12 - Calculating the WACC. Gnomes R Us is considering a...Ch. 12 - Prob. 21QP Ch. 12 - Calculating the Cost of Debt. Ying Import has...Ch. 12 - Prob. 23QP Ch. 12 - Adjusted Cash Flow from Assets. Ward Corp. is...Ch. 12 - Adjusted Cash Flow from Assets. In the previous...Ch. 12 - Prob. 26QP Ch. 12 - WACC and NPV. Photochronograph Corporation (PC)...Ch. 12 - Project Evaluation. This is a comprehensive...Ch. 12 - Prob. 1CC Ch. 12 - Cost of Capital for Layton Motors You have...Ch. 12 - Prob. 3CC Ch. 12 - Prob. 4CC Ch. 12 - Prob. 5CC

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Solution Summary: The author explains the dividend growth model (DGM) cost of equity estimation.

Concept explainers

Videos

Want to see the full answer?

Chapter 12 Solutions