I4 Intro Garden Depot has just paid an annual dividend of $3.5 per share. Analysts expect the

I4

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Intro Garden Depot has just paid an annual dividend of $3.5 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $36 and its beta is 1.2. Its bonds have a yield to maturity of 8%, and the risk-premium of its stock over its bonds is 3%. The risk-free rate is 4% and the expected return on the market portfolio is 6%. The company is in the process of issuing new common stock, with flotation costs of 5% of the issue price. Part 1 Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the CAPM? (Please keep 4 decimal places of your answer.) 4+ decimals Submit Part 2 Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the DCF approach? (Please keep 4 decimal places of your answer.) 3+ decimals Intro Garden Depot has just paid an annual dividend of $3.5 per share. Analysts expect the firm's dividends to grow by 6% forever. Its stock price is $36 and its beta is 1.2. Its bonds have a yield to maturity of 8%, and the risk-premium of its stock over its bonds is 3%. The risk-free rate is 4% and the expected return on the market portfolio is 6%. The company is in the process of issuing new common stock, with flotation costs of 5% of the issue price. Part 1 Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the CAPM? (Please keep 4 decimal places of your answer.) 4+ decimals Submit Part 2 Attempt 1/3 for 10 pts. What is the cost of equity from retained earnings according to the DCF approach? (Please keep 4 decimal places of your answer.) 3+ decimals

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Q1 Using CAPM model Required rate of return risk free rate beta market return risk free r... View the full answer