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.
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