Stock in country road industries has a beta of 1.62. the market risk premium is 8.2 percent while t-bills are currently yielding 2.9 percent. country road's last paid annual dividend was $1.87 per share and dividends are expected to grow at an annual rate of 3.8 percent indefinitely. the stock sells for $25 a share. what is the estimated cost of equity using the average return of the capm and the dividend discount model?

13.87%

Explanation:

Fristly, we calculate the cost of equity using capital asset pricing model:

Cost of equity_1 = Risk-free rate + Beta x Market risk premium

                       = 2.9% + 1.62 x 8.2% = 16.18%

(Note: T-bill yield is used as a proxy for risk-free rate).

Secondly, we find the implied cost of equity using dividend discounted model:

Stock price = Next year dividend/(Cost of equity_2 - Long term dividend growth) or:

25 =  1.87 x (1 + 3.8%)/(Cost of equity_2 - 3.8%). Solve the equation, we get: Cost of equity_2 = 11.56%

So the average cost of equity of the two method is (16.18% + 11.56%)/2 = 13.87%.

net worth is the difference between what you own and what you have. if you exceed your liabilities you have a positive net worth. if your liabilities are greater than your assets you have a negative net worth. its a snapshot of your financial situation. if you calculate your net worth you will see the end result of everything you've earned and spent as of now. net worth statements and all you asked of can you determine where you are, how to get where you want to be, if your spending   to much. honestly it can tell you a lot of things. i can go on, but you can paint the picture from here.

explanation:

answer; by looking at total product,marginal product,and changes in both after changes in inputs