Underestimated Inc.s common shares currently sell for $41 each. The firms management believes that its shares should really sell for $40 each. The firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 6 percent per year forever (and this is common knowledge to the market).

What is the current cost of common equity for the firm? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

The current cost of common equity for the firm

%

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What does management believe is the correct cost of common equity for the firm? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Cost of common equity (as per firm's belief)

%

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