Determine the cost of equity capital and the weighted average cost of capital for Intact Financial Corporation. You should estimate the cost of equity capital in three ways: using the dividend growth model assuming constant growth in dividends, using the dividend growth model assuming a sustainable growth rate, and using the Capital Asset Pricing Model. Use each of your three estimates to determine the Weighted Average Cost of Capital.

Constant-Growth Dividend Discount Model. For this section, you will use the constant-growth dividend discount model to estimate Intact Financial Corporation's expected rate of return. You will assume that the company is attempting to achieve a constant growth rate with its dividends and calculate that growth rate. The growth rate plus the expected dividend yield will give the expected rate of return. Historical Growth:

Calculations: You will need to use dividends that cover a full year, so sum the four quarterly dividends paid in each September to August period for each of the 5 years of data you have collected. In some cases, the company may have changed its dividend payment dates so that you may get a year with 5 dividends and/or a year with 3 dividends. You may need to make an adjustment so that you are always working with 4 dividends (i.e., move August up to September or September back to August). Some companies may have paid extra dividends. This will appear either as an added dividend payment or as an extra-large dividend that has been lumped with the regular dividend. If it looks like this has happened with your company you will need to check the appropriate annual report to determine if it was an extra or special dividend, in which case you should not include it in your calculations (but do still show it in your data and make a note that it was an extra dividend).FIN*2000 Fall 20234 Make sure your data have been adjusted for splits. If you see the dividends have suddenly dropped by a large amount, it is likely that there has been a split and you will need to make an adjustment (for example, if it was a 2-for-1 split you will need to divide all the dividends prior to the split by 2). Calculate the annual growth rates of the dividends (i.e., the percentage change in dividends from one year to the next). Calculate the average of the annual growth rates to get your estimate of the growth rate. Estimate the total dividends that will be paid between September 2023 and August 2024, assuming that the firm maintains the average annual growth rate that you just calculated. Calculate the firm's expected rate of return using your calculated expected dividend, growth rate, and the September 30, 2023 unadjusted price. Sustainable Growth: Again, you will use the constant-growth dividend discount model to estimate your company's expected rate of return. This time, however, you will estimate the growth rate by calculating the sustainable growth rate. Calculations: Estimate the return on equity and the plowback ratio using the financial statement data you have collected. Estimate the sustainable growth rate using the return on equity and the plowback ratio. Estimate the total dividends that will be paid between September 2023 and August 2024, assuming that dividends grow at the sustainable growth rate. Use your previously calculated dividend for the one year period from September 2022 to August 2023 from the Historical Growth section as your base. Calculate the firm's expected rate of return using your calculated expected dividend, growth rate, and the September 30, 2023 unadjusted price.