Estimating Components of both WACC and DDM Analysts estimate the cost of debt capital for Abbott Laboratories (NYSE: ABT) is 2.13% and that its cost of equity capital is 4.1%. Assume that ABT's marginal tax rate is 36%, the risk-free rate is 5.3%, the market risk premium is 5.7%, the ABT market price is $47.73 per common share, and its dividends are $1.26 per common share. (a) Compute ABT's average borrowing rate and its market beta. (Round your answers to one decimal place.) Average borrowing rate = Answer% Market beta = Answer (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 share/Cost of equity capital.) (Round your answer to one decimal place.) Answer% (c) Compare the inferred cost of equity capital from part (b) to the 4.1% estimated cost of equity capital from analysts.

The inferred cost of equity capital seems high compared to 4.1%, which suggests that the investment has a negative beta.

The inferred cost of equity capital seems low compared to 4.1%, which suggests that the investment has a negative beta.

The inferred cost of equity capital seems high compared to 4.1%, which suggests that the investment has a positive beta.

The inferred cost of equity capital seems low compared to 4.1%, which suggests that the investment has a positive beta.