Anal ce Wrap lext General Paste Merge & Center $ - %) 0858 Clipboard Font Alignment Number 15 INPUTS USED IN THE MODEL H B D E 5 IMPORTANT NOTE: HERE THE CAPM AND THE DIVIDEND GROWTH METHODS PRODUCE APPROXIMATELY 6 THE SAME COST OF EQUITY. THAT OCCURRED BECAUSE WE USED A BETA IN THE PROBLEM THAT 7 FORCED THE SAME RESULT. ORDINARILY, THE TWO METHODS WILL PRODUCE SOMEWHAT DIFFERENT 8 RESULTS. 9 0 b. Calculate the cost of new stock using the dividend growth approach. 31 52 Do * (1 +9) Po - (1 - F) 53 54 55 c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r, and 56 rs as determined by the dividend growth approach and add that differential to the CAPM value for rs.) 57 58 Differential 59 60 61 Again, we would not normally find that the CAPM and dividend growth methods yield identical results. re 62 File Home Insert Draw Page Layout Formulas Data Review View Help Arial 10 La Paste 2 Wrap Text General - A A -AA- Merge & Center $ % 9 8 Clipboard Font Alignment Number A5 X INPUTS USED IN THE MODEL D E 11/17/2020 B 1 Student shelly stansbury 2 Chapter: 11 3 Problem: 18 4 5 INPUTS USED IN THE MODEL 6 7 Po 8 Net Ppt 9 Dp 10 D. 11 g 12 B-T rd 13 Skye's beta 14 Market risk premium, RPM 15 Risk free rate, IRF 16 Target capital structure from debt 17 Target capital structure from preferred sto 18 Target capital structure from common stc 19 Tax rate 20 Flotation cost for common $50.00 $30.00 $3.30 $2.10 7% 10% 0.83 6.0% 6.5% 45% 5% 50% 35% 10% 21