Question: Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 34.0%, and

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 34.0%, and the current dividend yield is 6.00%. Its beta is 1.28, the market risk premium is 12.00%, and the risk-free rate is 3.20%.

Use the CAPM to estimate the firms cost of equity.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Now use the constant growth model to estimate the cost of equity.

Note: Do not round intermediate calculations. Enter your answer as a whole percent.

Which of the two estimates is more reasonable?

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