Reference no: EM132044306

Underestimated Inc.’s common shares currently sell for $42 each. The firm’s management believes that its shares should really sell for $55 each. The firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 3 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 % Link to Text 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%.)