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Question - The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The current risk-free rate of return is 4.2%. The market risk premium is 6.1%. D'Amico Co. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, D'Amico's cost of equity is. The cost of equity using the CAPM approach Kuhn Co. is closely held and, consequently, cannot generate reliable inputs for the CAPM approach. Kuhn's bonds yield 11.5%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 3%. Using the bond-yield-plus-risk-premium approach, find the firm's cost of equity: 18.1% 17.4% 13.8% 14.5% The cost of equity using the Discounted Cash flow (or Dividend Growth) Approach Turnbull Co.'s stock is currently selling for $32.45, and the firm expects its dividend to be $1.38 in one year. Analysts project the firm's growth rate to be constant at 5.7%. Using the discounted cash flow (DCF) approach, what is Turnbull's cost of equity?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93137471

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