ECON 2100 Lecture Notes - Lecture 6: Dividend Discount Model, Cogeco, Capital Asset Pricing Model
5 Apr 2016
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This memo consists of my research and findings that i have gathered for the potential company expansion. The analysis will aid in the decision of an appropriate rate for discounting the cash flows. In preparation to the startup of a new division,i will give my recommendation choosing a discount rate to use in evaluating the proposed investment. As requested, i estimated the cost of equity and the weighted average cost of capital for the firm. Constant-growth dividend discount model for historical and sustainable growth, along with the. Capital asset pricing model to calculate the three rates of return for cogeco inc. (cgo. to). respectively, the three rates are; I then used the rates of returns to calculate the three weighted average costs of capital; Through the research and calculations using the weighted average cost of capital (wacc), i recommend that we go with the 9. 70% discount ratein evaluating the investment.
