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What does management believe correct cost of common equity

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Reference no: EM132930170

Pharoah Inc.'s common shares currently sell for $40 each. The firm's management believes that its shares should really sell for $60 each. The firm just paid an annual dividend of $2 per share and management expects those dividends to increase by 8 percent per year forever (and this is common knowledge to the market).

Problem 1: What is the current cost of common equity for the firm?

Problem 2: What does management believe is the correct cost of common equity for the firm?

Reference no: EM132930170

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