4. The cost of retained earnings If a firm cannot invest retained earnings to earn a rate of return should return those funds to its stockholders, the required rate of return on retained earning it The current risk free rate of return is 4.20% and the current market risk premium is 6.60%. Fuzzy Button Clothing Company has a bata of 0.17. Uning the Capital Asset Pricing Model (CAPM) approach, Fuzzy Button's cost of equity is Green Caterpillar Garden Supplies Inc. is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Green Caterpillar's bonds yield 10.20%, and the firm's analysts estimate that the firm's risk premium on its stock relative to its bonds is 3.00%. Using the bond-ylvid- plus-risk-premium approach, the firm's cost of equity is The stock of Blue Hamster Manufacturing Inc. is currently selling for $32.45, and the firm expects its dividend to be $2.35 in one year. Analysts project the firm's growth rate to be constant at 5.70%. Using the discounted cash flow (DCF) approach, Blue Hamster's cost of equity is estimated to be