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should return those funds to its stockholders. The cost of equity using the CAPM approach The current risk-free rate of return ( rRF) is 4.23% while the market risk premium is 5.75%. The Burris Company has a beta of asset pricing model (CAPM) approach, Burris's cost of equity is The cost of equity using the bond yield plus risk premium approach cost of internal equity. Adams's bonds yield 10.28%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds Based on the bond-yield-plus-risk-premium approach, Adams's cost of internal equity is: 17.29% 13.14% 15.21% 13.83% The cost of equity using the discounted cash flow (or dividend growth) approach Johnson Enterprises's stock is currently selling for $32.45 per share, and the firm expects project the firm's growth rate to be constant at 5.72%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approng what is Johnson's cost of internal equity? 13.61% 17.50% 12.96% 12.31% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or In general, there are three available methods to generate such an estimate: - Carry forward a historical realized growth rate, and apply it to the future. - Use the retention growth model. Suppose Johnson is currently distributing 45% of its earnings in the form of cash dividends. It has also historically generated an average return equity (ROE) of 14%. Johnson's estimated growth rate is