4. Problem 10.06 (Cost of Common Equity) The future eamings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $28.50 per share; its last dividend was $2.50; and it will pay a $2.65 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % b. If the firm's beta is 1.6, the risk-free rate is 8%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. % c. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rs ? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. % d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. % 5. Problem 10.08 (Cost of Common Equity and WACC) Palencia Paints Corporation has a target capital structure of 25% debt and 75% common equity, with no preferred stock. Its before-tax cost of debt is 9%, and its marginal tax rate is 25%. The current stock price is P0=$22.50. The last dividend was D0=$2.00, and it is expected to grow at a 6% constant rate. What is its cost of common equity and its WACC? Do not round intermediate calculations. Round your answers to two decimal places. rs=% WACC=%