Question
Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The
Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a year forever. The stock currently sells for $73 a share. The before-tax cost of debt is 6% and the tax rate is 34%. The target capital structure consists of 70% debt and 30% equity. What is the company's weighted average cost of capital?
Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $34.9 and its beta is 0.6. The risk-free rate is 2% and the expected return on the market portfolio is 8%. What is the best guess for the cost of equity?
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