Question: Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium 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-yield-plus-risk-premium approach, and the DCF model, Barton expects next year's annual dividend, D1, to be $1.60 and it expects dividends to grow at a constant rate 9=3.2%. The firm's current common stock price, P6, is . $25.00. The current risk-free rate, fur, =4.1%; the market risk premium, APM, =5.3%, and the firm's stock has a current beta, b, =1.75. Assume that the firm's cost of debt, ro is 6.10\%. The firm uses a 2.3\% risk premium when arriving at a balipark estimate of its cost of equity using the bond-yield-plus-risk-premium approsch. What is the firm's cost of equity using each of these three approaches? Round your answers to two decimal places. CNPM cosk of equity: Bond yield plus risk premium: DCF cost of equity: What is your best estimate of the firm's cost of equity
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