Find the cost of equity, the cost of debt, and the WACC of Royal Gold, Inc. (RGLD). Show your computational steps clearly and document data sources used and any assumptions you made.
a. In estimating cost of equity, use both DGM and CAPM approaches. Do you get the same number?
b. Which estimate (from DGM or CAPM) do you trust most and will use in your WACC computation? Why? Explain briefly. What is the WACC?
4. Describe the firm's current capital structure (D/E).
a. Can you justify the firm's current capital structure using one of the capital structure theories we have learned?
b. If the firm is not at an optimal (or proper) capital structure right now, comment on the negative consequence of keeping its current capital structure, and what the firm should do to move toward a more proper capital structure.