Our company is planning an expansion in the banking industry. This is a new line of business for our company and therefore we cannot use our company cost of capital to analyze this investment. Instead, we need to determine a cost of capital that is appropriate for this new industry.

In order to find an appropriate cost of capital, we should analyze a company that currently operates in the banking industry. As such, I would like you to determine the cost of equity capital and the weighted average cost of capital for National Bank of Canada. 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. For more information, please consult the detailed instructions on CourseLink.

Please submit your data and results for the two dividend growth models as a pdf file, including documentation so that the results could be replicated, to the PEAR link on CourseLink by $11$:$59$ pm on February $7.$ Please submit your data and results for the Capital Asset Pricing Model and Weighted Average Cost of Capital as pdf files, including documentation so that the results could be replicated, to the PEAR link on CourseLink by $11$:$59$ pm on March $13.$

In addition, please submit a one page memo summarizing your results $($including your three estimates of the cost of equity capital and your three estimates of the Weighted Average Cost of Capital$)$ and providing your recommendation for the cost of capital to be used in analyzing the investment, as well as a brief explanation of why you are making that recommendation. The memo should be submitted as a pdf file to PEAR by $11$:$59$ pm on March $13.$

Should you have any questions regarding this assignment that are not answered in the instructions on CourseLink do not hesitate to contact me$.$ I look forward to seeing the results of your investigations.