A company is wholly equity funded.

56.76, 56.75Working:Cost of equity using CAPMke=Rf+β(Rm−Rf)k_e = R_f + \beta (R_m - R_f)ke​=Rf​+β(Rm​−Rf​) ke=4%+1.2×7%=4%+8.4%=12.4%k_e = 4\% + 1.2 \times 7\% = 4\% + 8.4\% = 12.4\%ke​=4%+1.2×7%=4%+8.4%=12.4% Dividend Growth Model (Gordon):Firm is all-equity, so equity value = firm value.D0=4 millionD_0 = 4\ \text{million}D0​=4 millionGrowth g=5%=0.05g = 5\% = 0.05g=5%=0.05So D1=D0(1+g)=4×1.05=4.2 millionD_1 = D_0 (1+g) = 4 \times 1.05 = 4.2\ \text{million}D1​=D0​(1+g)=4×1.05=4.2 millionValue=D1ke−g=4.20.124−0.05=4.20.074≈56.76 million\text{Value} = \frac{D_1}{k_e - g} = \frac{4.2}{0.124 - 0.05} = \frac{4.2}{0.074} \approx 56.76\ \text{million}Value=ke​−gD1​​=0.124−0.054.2​=0.0744.2​≈56.76 million So the company value is $56.76 million to two decimal places.