Calculate WACC, then plot IOS and MCC schedules.
Step 1: Estimate the cost of equity
ks = + g = + 6% = 16.6%.
ke = + g = + 6%
= + 6% = 19.1%.
D0(1 + g)
P0
$2(1.06)
$20
D1
P0(1 - F)
$2(1.06)
$20(1 - 0.19)
$2.12
$16.2
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