315 The information in Table 7.8 is available for two different common stocks: Company A and Company B TABLE 7.8 Common Stocks Free cash flow per share in the current year Growth rate in cash flow per share Company A $1.00 Company B $5.00 4% 8% Beta 1.3 0.8 7% 7% Risk-free return Expected return on all stocks 13.5% 13.5% a. Estimate the cost of equity for each firm. Answer: Company A = 15.45%; Company B = 12.2% b. Assume that the companies' growth will continue at the same rates indefinitely. Estimate the per-share value of each company's common stock. Answer: Company A-61342: Company B --$61.00- $14.50 $63.41