Bond-yield- plus-risk-premium approach

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The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 7% per year. Carpetto's common stock currently sells for $23.00 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? 1). If the ?rm's beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the ?rm's cost of common equity using the CAPM approach? c. If the ?rm's bonds earn a return of 12%, based on the bond-yield- plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range in your calculations.

Reference no: EM133002794

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