eBook Problem Walk-Through The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8% per year. Callahan's common stock currently sells for $25.75 per share; its last dividend was $1.50; and it will pay a $1.62 dividend at the end of the current year a. Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places. 96 b. If the firm's beta is 1.6, the risk-free rate is 3%, and the average return on the market is 12%, what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places. c. If the firm's bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. Round your answer to two decimal places. d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not round Intermediate calculations. Round your answer to two decimal places 10. Problem 10.10 (WACC and Percentage of Debt Financing) eBook Olsen Outfitters Inc, believes that its optimal capital structure consists of 55% common equity and 45% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with a cost of ry 10%. New common stock in an amount up to $6 million would have a cost of = 11.5%. Furthermore, Olsen can raise up to $2 million of debt at an interest rate of ra -10% and an additional so million of debt atra-14%. The CFO estimates that a proposed expansion would require an investment of $3.7 million. What is the WACC for the last dollar raised to complete the expansion? Round your answer to two decimal places