Investors expect to receive a dividend yield, P2D2, plus a capital gain, 9 , for a fotal expected return: in , this expected retura is also equal to the required return, its easy to calculate the dividend yield; but because stock prices fluctuate, the yield varies from day to day, which leads to fluctuations in the DCF cost of equity. Also, it is cifficult to determine the proper growth especially if past growth rates are not expected to continue in the future. However, we can use growth rates as projected by security analysts, who regularly forecast gromth rates of eamings and dividends. Which method should be used to ewimate r.? It management has contidence in one method, it would probably lase that methods estimate otherwise, it might use some weighted averoge of the three methods, ludgment is important aod comes into play here, as is true for most decisions in feance. Quantitative Problem: Barton Industries estimates its cost of common equity by using three appraaches: the CARM, the bond-vield-pi us-risk-premim approach, and the DCF model. Barton expects nest year's annual dividend, Di, to be 52.10 and it expects dividends to grow at a constant rate 9=4.0. The firm's current common stock pnce, P. is 525.00. The current risk free rate, FN,=4.776; the market tisk premsm, a.Pr, =6.0m, and the firms stock has a current beta, b, =1.30. Assume that the firm's cost of debt, Ta. 15 9.305. The frim uses a 3 . 04t nsk premiurn ahen arrwing at a balpark estimate of its cost of equity using the bond-yield-plus-nisk-premium asprosch. What is the firm's cost of equity uting each of these three approsches? fbound your answers to two decimal blaces. CADM cost of equity: Bond yield plus risk premiurn? DCr cost of equity: What is your best estinate of the firm's cost of equify