Ch 10: Assignment - The Cost of Capital The cost of equity using the CAPM approach The current risk-free rate of return (TRP) is 3.86% while the market risk premium is 5.75%. The Allen Company has a beta of 0.92. Using the capital asset pridng model (CAPM) approach, Allen's cost of equity is The cost of equity using the bond yield plus risk premium approach The Kennedy 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. Kennedy's bonds yield 10.28%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 4.95%. Based on the bond-yield-plus-risk-premium approach, Kennedy's cost of internal equity is: 15.23% O 14.47% 16.75% 18.28% The cost of equity using the discounted cash flow (or dividend growth) approach Tyler Enterprises's stock is currently selling for $32.45 per share, and the firm expects its per-share dividend to be $2.35 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 Tyler's cost of internal equity? 15.24% 14.51% 13.78% 18.14%