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Estimating Components of both WACC and DDM Analysts estimate the cost of debt capital for Abbott Laboratories ( NYSE: ABT ) is 2 . 3
Estimating Components of both WACC and DDM
Analysts estimate the cost of debt capital for Abbott Laboratories NYSE: ABT is and that its cost of equity capital is Assume that ABT's marginal tax rate is the riskfree rate is the market risk premium is the ABT market price is $ per common share, and its dividends are $ per common share.
a Compute ABT's average borrowing rate and its market beta. Round your answers to one decimal place.
Average borrowing rate
Market beta
b Assume that its dividends continue at the current level in perpetuity. Use the constant perpetuity dividend discount model to infer the market's expected cost of equity capital. Hint: Use Price per share Dividends per shareCost of equity capital.Round your answer to one decimal place.
c Compare the inferred cost of equity capital from part b to the estimated cost of equity capital from analysts.
The inferred cost of equity capital seems high compared to which suggests that the investment has a negative beta.
The inferred cost of equity capital seems low compared to which suggests that the investment has a positive beta.
The inferred cost of equity capital seems high compared to which suggests that the investment has a positive beta.
he inferred cost of equity capital seems low compared to which suggests that the investment has a negative beta.
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