Estimating WACC and Expected Growth in Dividends Model United Parcel Service Inc. was trading at $97.53 at December 31, 2018. Its dividend per share was $3.84, its market beta was estimated to be 1.44, its average pretax borrowing rate was 2.6%, and its assumed statutory tax rate was 22.4%, consisting of the 21% federal rate plus the 1.4% state and local rate, net of any federal benefits. UPSs market value of equity (market capitalization) was $83.90 billion, computed as 860.2386 million shares times its $97.53 price, and its total market value (enterprise value) was $107.19 billion, computed as $83.90 billion in equity plus the fair value of long-term debt of $23.29 billion (disclosed in note 8 of the financial statements). Assume a risk-free rate of 2.1% and a market risk premium of 5% to answer the following requirements. (a) Estimate UPS's cost of debt capital, cost of equity capital, and weighted average cost of capital. (Round your answers to one decimal place.) Cost of debt capital = Answer% Cost of equity capital = Answer%

Calculate the weighted average cost of capital. (Use your rounded answers from above. Do not round until your final answer. Round to one decimal place.)

Weighted average cost of capital = Answer% (b) Using the dividend discount model, and assuming a constant perpetuity at its dividend level, estimate UPS's intrinsic value per share. (Use the rounded cost of equity capital calculated in (a). Round your answer to two decimal places.) $Answer (c) Using the Gordon Growth DDM, and assuming next periods dividends equal $3.84 and grow at a constant rate for each period thereafter, infer the markets expected growth in dividends that are necessary for UPSs intrinsic value to equal its observed price per common share. (Do not round until your final answer. Round to one decimal place.) Answer%