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10-6 COst OF COMMON eQUItY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahans

10-6 COst OF COMMON eQUItY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahans common stock currently sells for $22.00 per share, its last dividend was $2.00, and it will pay a $2.12 divi-dend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? b. If the firms beta is 1.2, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firms cost of common equity using the CAPM approach?

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