Question: Was having difficulty with this practice problem set. Could you please help? Will be sure to leave a review! Thank you so much! There are
Was having difficulty with this practice problem set. Could you please help? Will be sure to leave a review! Thank you so much!

There are two firms that have the same fixed earnings per share of E per year, the same policy of paying out all earnings as dividends, and the same systematic risk. However, while the first firm is expected to be around forever the second firm has a unique charter that specifies that it will be dissolved 10 year from today immediately after paying the annual dividend to its shareholders. If the price per-share of the first firm is $100 dollars and of the second is $40 what is the two firms cost of capital. There are two firms that have the same fixed earnings per share of E per year, the same policy of paying out all earnings as dividends, and the same systematic risk. However, while the first firm is expected to be around forever the second firm has a unique charter that specifies that it will be dissolved 10 year from today immediately after paying the annual dividend to its shareholders. If the price per-share of the first firm is $100 dollars and of the second is $40 what is the two firms cost of capital
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