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Problem 3 Intro Munich Re Inc. is expected to pay a dividend of $4.82 in one year, which is expected to grow by 4% a

Problem 3

Intro

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 $62 a share.

The before-tax cost of debt is 5% and the tax rate is 34%.

The target capital structure consists of 20% debt and 80% equity.

Attempt 7/10 for 10 pts.

Part 1

What is the company's weighted average cost of capital?

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