(Solution) 13.21 Cost Of Common Stock: Underestimated Inc.'s Common Shares Currently Sell For $3 Share.The Firm Believes That Its Shares Should Really Sell For | Snapessays.com


(Solution) 13.21 Cost of common stock: Underestimated Inc.'s common shares currently sell for $3 share.The firm believes that its shares should really sell for


 Cost of common stock: Underestimated Inc.’s common shares currently sell for $36 per   share.The firm believes that its shares should really sell for $54 per share. If the firm just   paid an annual dividend of $2 per share and the firm expects those dividends to increase   by 8 percent per year forever (and this is common knowledge to the market), what is the   current cost of common equity for the firm and what does the firm believe is a more   appropriate cost of common equity for the firm?           Use attached Excel spreadsheet and use appropriate formulas.13.21

 

share.The firm believes that its shares should really sell for $54 per share

 

paid an annual dividend of $2 per share and the firm expects those divide

 

by 8 percent per year forever (and this is common knowledge to the mark

 

current cost of common equity for the firm and what does the firm believe

 

appropriate cost of common equity for the firm?

 

Current stock price

 

$36

 

Firm's expected stock price

 

$54

 

$2

 

Constant growth rate

 

8%

 

Current cost of common equity

 

Appropriate cost of equity (as per firm's belief)

 

Cost of common stock:

 

Underestimated Inc.’s common shares current

 

Dividend just paid (D

 

)

 


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This question was answered on: May 23, 2022

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