An investment is expected to generate a cash flow of $100,000 each year forever,
with the first cash flow coming exactly one year from today and each subsequent
cash flow coming exactly one year after the previous cash flow. The value of this
investment is $1,379,310.34. What is the annually compounded discount rate being
used to value this investment? Round all intermediate calculations to 6 decimal
points. Your final answer should be within 0.05% of the correct answer choice.
6.67%
8.13%
4.28%
7.25%
A firm's equity has a beta of 1.4. The risk-free rate is 3%. Last year, the aggregate
market portfolio paid a dividend of $1,5 trillion. It is expected that the aggregate
dividend paid by the market portfolio will grow at a rate of 3% per year, each year,
forever. The current value of the aggregate market porfolio is $25 trillion. What is
the cost of of equity capital for this firm? Round all intermediate calculations to 6
decimal points. Your final answer should be within 0.05% of the correct answer
choice.
12.39%
15.85%
14.74%
11.65%