4. The cost of retained earnings The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The current risk-free rate of return ( rRF) is 3.86% while the market risk premium is 6.63%. The Wilson Company has a beta of 0.78. Using the capital asset pricing model (CAPM) approach, Wilson's cost of equity is The cost of equity using the bond yield plus risk premlum approach The Hoover Company is closely held and, therefore, cannot generate reliable inputs with which to use the CAPM method for estimating a company's cost of internal equity. Hoover's bonds yield 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 3.55\%. Based on the bond-yield-plus-risk-premium approach, Hoover's cost of internal equity is: 16.58% 18.84% 15.07% 14.32% The cost of equity using the discounted cash flow (or dividend growth) approach Ford Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $1.38 in one year. Analysts project the firm's growth rate to be constant at 7,27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Ford's cost of internal equity? 10.94% 11,52% 15.55% 12.10% Estimating growth rates It is often difficult to estimyste the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG spprosch. In general, there are three avallable methods to generate such an estimate