Question: How do I solve this and what are the correct answers? Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected
Cost of Equity The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's comimon stock sells for $20 per share, its last dividend was $2.00, and the company will pay a dividend of $2.08 at the end of the current year. a. Usina the discounted cash flow approach, what is its cost af equity? Round your answer to two decimal ploces. b. If the firm's beta is 12 , the risk-free rate is 9%, and the expected return on the market is 12%, then what would be the firm's cost of esuity based on the CAPM approach? Round your answer to two decimal places. 7= c. If the firm's bonds carn a return of 10%, then what would be your estimate of rs using the own-bond-yield-plus-judgmental-riskpremium approach? (tint: Use the inid-point of the risk premium range.) Round your answer to two decimal places. 4h d. On the bass of the results of parts a-c, what would be your estimate of Shelby's cost of equity? Assume Stielby values each approach equally, Round your answer to two decimal places
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