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6. The cost of retained earnings If a firm cannot invest retained earnings to earn a rate of retum return those funds to its stockholders.
6. The cost of retained earnings If a firm cannot invest retained earnings to earn a rate of retum return those funds to its stockholders. Te required rate of retuin on relained earhmos, if shoul The cost of equity using the CAPM approach beta of 0.78. Using the Capital Asset Priong Model (CAPM) approach, Allen's cost of equity is The cost of equity using the bond vield plus risk premium approakh The Harrison Company is dosely held and, therefore, cannot generate relable irputs with wh of mteinal equty, Harrison's bonds yeld 11.52%, and the firm's analysts estrmate that the fif CAPM method for estimatng a campany kerst Based on the bond-yield-plus-tisk-premium approach, Harison's cost of intemal equicy is: wim on its stack over its bonds a 3.5574 . 15.07% 14.3240 Hased on the hornd-yeid-plus-nsk-premiarn approach, Harrison's cost of internal equity is: 15.07% 16250% 1432% 1304% The cost of equity asing the discoanted cash flow (or dividend growth) approach of incurnal equity? 14.99% 11.10% 10.55% 11.66%
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