Question
1. COST OF COMMON EQUITY The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 7% per year. Carpetto's
1. COST OF COMMON EQUITY 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. If the firm's beta is 1.3, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round to TWO decimal places.
2. COST OF COMMON EQUITY The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 6% per year. Carpetto's common stock currently sells for $22.00 per share; its last dividend was $2.00; and it will pay a $2.05 dividend at the end of the current year. Using the DCF approach, what is its cost of common equity? Express as a percentage rounded to TWO decimal places, example: 0.05155 = 5.16%.
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