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13.21 Cost of common stock: Underestimated Inc.’s common shares currently sell for $36 per share.The 1 answer below » 13.21 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? Current stock price $36 View complete question » 13.21 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? Current stock price $36 Firm’s expected stock price $54 Dividend just paid (D0) $2 Constant growth rate 8% Current cost of common equity Appropriate cost of equity (as per firm’s belief) View less » Oct 23 2015 10:46 PM
