cost of equity capital and the weighted average cost of capital for BCE
Cost of equity capital and the weighted average cost of capital for BCE
Our company is planning an expansion in the communications industry. This is a new line of business for our company and therefore we cannot use our company cost of capital to analyze this investment. Instead, we need to determine a cost of capital that is appropriate for this new industry.
In order to find an appropriate cost of capital, we should analyze a company that currently operates in the communications industry. As such, I would like you to determine the cost of equity capital and the weighted average cost of capital for BCE. You should estimate the cost of equity capital in three ways: using the dividend growth model assuming constant growth in dividends, using the dividend growth model assuming a sustainable growth rate, and using the Capital Asset Pricing Model. Use each of your three estimates to determine the Weighted Average Cost of Capital.