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The CFO of Gib Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data: r RF
The CFO of Gib Industries hired you as a consultant to help estimate its cost of capital. You have obtained the following data: rRF = 5.00%, RPM = 5.00% (market risk premium), and b = 1.25. D1 = $1.20, P0 = $30.00, and g = 6.00% (constant). You were asked to estimate the cost of equity based on the two most commonly used methods (CAPM and DCF) then to indicate the difference between the two estimates. What is that difference? Show all work.
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