Question: The information in Table is available for two different common stocks: Company A and Company B. a. Estimate the cost of equity for each firm.

The information in Table is available for two different common stocks: Company A and Company B.
a. Estimate the for each firm.
b. Assume that the companies€™ growth rates will continue at the same rate indefinitely. Estimate the per share value of each company€™s commonstock.

Free cash flow per-share at the end of year 1 Growth rate in cash flow per share Beta Risk-free retum Expected return on all stocks Company A $100 8% 1.3 7% 13.5% CompanyB $5.00 4% 0.8 7% 13.5%

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