# Question

The earnings, dividends, and stock price of Talukdar Technologies Inc. are expected to grow at 7 percent per year in the future. Talukdar’s common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the current year.

a. Using the discounted cash flow approach, what is its cost of retained earnings?

b. If the firm’s beta is 1.6, the risk-free rate is 9 percent, and the average return on the market is 13 percent, what is the firm’s cost of equity using the CAPM approach?

c. If the firm’s bonds earn a return of 12 percent, what is rs using the bond- yield-plus-risk-premium approach?

d. Based on the results of parts (a) through (c), what would you estimate Talukdar’s cost of retained earnings to be?

a. Using the discounted cash flow approach, what is its cost of retained earnings?

b. If the firm’s beta is 1.6, the risk-free rate is 9 percent, and the average return on the market is 13 percent, what is the firm’s cost of equity using the CAPM approach?

c. If the firm’s bonds earn a return of 12 percent, what is rs using the bond- yield-plus-risk-premium approach?

d. Based on the results of parts (a) through (c), what would you estimate Talukdar’s cost of retained earnings to be?

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