Ch11. 4. True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders.

- True

- False

The current risk-free rate of return is 3.80% and the current market risk premium is 6.60%. Blue Hamster Manufacturing Inc. has a beta of 0.87. Using the Capital Asset Pricing Model (CAPM) approach, Blue Hamsters cost of equity is ____ .

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 ___ .