Amarindo, Inc.​ (AMR), is a newly public firm with 11.5 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its free cash flow in the coming year to be $15.19 million, and you expect the​ firm’s free cash flows to grow by 3.8​% per year in subsequent years. Because the firm has only been listed on the stock exchange for a short​ time, you do not have an accurate assessment of​ AMR’s equity beta.​ However, you do have beta data for​ UAL, another firm in the same ​industry.

Chart/Info Given: UAL ….. Equity Beta: 1.20  Debt Beta: 0.24  Debt-Equity Ratio: 0.8

AMR has a much lower​ debt-equity ratio of 0.24​, which is expected to remain​ stable, and its debt is risk free.​ AMR’s corporate tax rate is 25​%, the ​risk-free rate is 5.3​%, and the expected return on the market portfolio is 10.9%.

a. Estimate​ AMR’s equity cost of capital.

b. Estimate​ AMR’s share price.