CORPORATE
VALUATION COST OF CAPITAL 7-11
PRACTICE EXERCISE
(Continued)
3. Tri-Pro's current common stock price is $30, and the stock recently paid
a yearly dividend of $2.50. Analysts following Tri-Pro's industry feel that Tri-Pro will
grow at a 4% annual rate for the next few years. What is the appropriate cost of equity
that Tri-Pro should use in its analysis?
________ %
4. Chicago Incorporated has a beta of 1.25. The market portfolio is expected to earn an
average of 8.20% and the risk-free rate is currently estimated to be 3.55%. What is the
estimated cost of equity for Chicago Inc.?
________ %