The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow at 7 percent per year in the future. Carpetto's common stock sells for $23 per share, its last dividend was $2.00, and it will pay a dividend of $2.14 at the end of the current year.
If the firm's bonds earn a return of 12 percent, what will Rs be based on the bond-yield-plus-risk-premium approach, using the midpoint of the risk premium range?