Ch11. 4 (cont.)

Fuzzy Button Clothing Company is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Fuzzy Buttons bonds yield 11.50%, and the firms analysts estimate that the firms risk premium on its stock relative to its bonds is 3.00%. Using the bond-yield-plus-risk-premium approach, the firms cost of equity is ___ .

The stock of Cute Camel Woodcraft Company is currently selling for $32.45, and the firm expects its dividend to be $2.35 in one year. Analysts project the firms growth rate to be constant at 7.20%. Using the discounted cash flow (DCF) approach, Cute Camels cost of equity is estimated to be ___.