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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 $1.70 and it expects dividends to grow at a constant rate g = 3.2%. The firm's current common stock price, P0, is $25.00. The current risk-free rate, rRF, = 4.4%; the market risk premium, RPM, = 6.1%, and the firm's stock has a current beta, b, = 1.10. Assume that the firm's cost of debt, rd, is 5.79%. The firm uses a 3.1% 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 each of these three approaches? Round your answers to two decimal places.
CAPM cost of equity: %
Bond yield plus risk premium: %
DCF cost of equity: %
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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