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 Cost of common stock: Underestimated Inc.'s common shares currently sell for $3 share.The firm believes that its shares should really sell for $54 per share. If the firm paid an annual dividend of $2 per share and the firm expects those dividends to incre by 8 percent per year forever (and this is common knowledge to the market), what is 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 Firm's expected stock price Dividend just paid (D0) Constant growth rate Current cost of common equity Appropriate cost of equity (as per firm's belief) $36 $54 $2 8% es currently sell for $36 per 4 per share. If the firm just hose dividends to increase o the market), what is the rm believe is a more