Back to Assignment Attempts Keep the Highest 2/4 3. The cost of retained earnings 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 4.20% and the current market risk premium is 6.10%. Fuzzy Button Clothing Company has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Fuzzy Button's cost of equity is Green Caterpillar Garden Supplies Inc. is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Green Caterpillar's bonds yield 11.50%, and the firm's analysts estimate that the firm's risk premium on its stock relative to its bonds is 4.50%. Using the bond-yield- plus-risk-premium approach, the firm's cost of equity is The stock of Blue Hamster Manufacturing Inc. is currently selling for $32.45, and the firm expects its dividend to be $2.35 in one year. Analysts project the firm's growth rate to be constant at 7.20%. Using the discounted cash flow (DCF) approach, Blue Hamster's cost of equity is estimated to be Grade It Now Save & Continue Continue without saving