Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems Its earnings and dividends have been growing at a rate of 35 0 , and the current dividend yield is 7 00 Its beta is 1 30, the market risk premium is 13 00 , and the risk free rate is 3 00 Use the CAPM to estimate the firms cost of equity Note Do not round intermediate calculations Enter your answer as a percent rounded to 2 decimal places Now use the constant growth model to estimate the cost of equity Note Do not round intermediate calculations Enter your answer as a whole percent Which of the two estimates is more reasonable Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems Its earnings and dividends have been growing at a rate of 35 0 , and the current dividend yield is 7 00 Its beta is 1 30 , the market risk premium is 13 00 , and the risk free rate is 3 00 a Use the CAPM to estimate the firm's cost of equity Note Do not round intermediate calculations Enter your answer as a percent rounded to 2 decimal places b Now use the constant growth model to estimate the cost of equity Note Do not round intermediate calculations Enter your answer as a whole percent c Which of the two estimates is more reasonable

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Posted on Oct 07, 2024

Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 35.0%, and

Use the CAPM to estimate the firms cost of equity.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

Now use the constant growth model to estimate the cost of equity.

Note: Do not round intermediate calculations. Enter your answer as a whole percent.

Which of the two estimates is more reasonable?

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Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 35.0%, and the current dividend yield is 7.00%. Its beta is 1.30 , the market risk premium is 13.00%, and the risk-free rate is 3.00%. a. Use the CAPM to estimate the firm's cost of equity. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. b. Now use the constant growth model to estimate the cost of equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent. c. Which of the two estimates is more reasonable