Question: Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yiald-plus-risk-peremium approach, and the DCF model. Barton expects
Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yiald-plus-risk-peremium approach, and the DCF model. Barton expects next year's annual dividend, D2, to be $2.20 and it expects dividends to grow at a constant rate 9= 3.4\%. The firm's current common stock price, P0, is $20.00. The current risk-free rate, req, =5.0%; the market risk premium, RPM, =6.496, and the firm's stock has a current beta, b, = 1.40. Assume that the firm's cost of debt, rs, is 11.4496. The firm uses a 3.496 risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using oach of these three approaches? Round your answers to two decimal places. what as yuar ves
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