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answer Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the capM, the bond-yield-plus-risk-premium approach, and th DCF model. Barton
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Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the capM, the bond-yield-plus-risk-premium approach, and th DCF model. Barton expects next year's annual dividend, D D1, to be $2.00 and it expects dividends to grow at o constant rate g=4.4%. The firm's current common stock Price, Po, is $20.00. The current risk-free rate, m1=4.8%; the market nsk premiutr, RPM1=6.3%, and the firm's stock has a current beta, b, =1.25. A ssume that the lirm's cost of debt, fd, is 12.83%. The firm uses a 3.3% risk premium when arriving at a ballpark estimate of its cost of equity using the bond yield plus. risk-premium approach. What is the firm's cost of equity using each of these three approaches? Round your answers to two decimal places. CADM cost of equity: What is your best notimate of the firm's cost of equity Step by Step Solution
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