Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond$-$yield$-$plus$-$risk$-$premium approach, and the DCF model. Barton expects next year's annual dividend, D$1,$ to be $$1\mathrm{.}60$ and it expects dividends to grow at a constant rate g $=3\mathrm{.}0\%.$ The firm's current common stock price, P$0,$ is $$20\mathrm{.}00.$ The current risk$-$free rate, rRF$,=4\mathrm{.}0\%$; the market risk premium, RPM$,=5\mathrm{.}5\%,$ and the firm's stock has a current beta, b$,=1\mathrm{.}10.$ Assume that the firm's cost of debt, rd$,$ is $9\mathrm{.}45\%.$ The firm uses a $2\mathrm{.}5\%$ 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.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.

CAPM cost of equity:

Bond yield plus risk premium $,\%$

DCF cost of equity: $,\%$

What is your best estimate of the firm's cost of equity?

$-$Select$-$

$-$Select$-$

The best estimate is the highest percentage of the three approaches.

The best estimate is the average of the three approaches

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