Ir a firm cannot invest retained earnings to earn a rate of return greater than or equal to the required rate of return on retained earnings, it should return those funds to its stockholders The cost of equity using the CAPM approach The current risk-free rate of return (TRF) is 4.67% while the market risk premium is 6.63%. The Burris Company has a beta of 0.78. Using the capital asset pricing model (CAPM) approach, Burris's cost of equity is 10.824% The cost of equity using the bond yield plus risk premium 10.824% 9.84% The Harrison Company is closely held and therefore, cannot ge le inputs with which to use the CAPM method for estimating a company's cost of internal equity. Harrison's bonds yield 10.28%, and the is estimate that the firm's risk premium on its stock over its bonds is 3.55%. Based on the bond-yield-plus-risk-premium approach, H 10.332% bt of internal equity is: 11.808% 16.60% 13.83% 15.21% 17.29% The cost of equity using the discounted cash flow (or dividend growth) approach Johnson 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 Johnson's cost of internal equity? The cost of equity using the discounted cash flow (or dividend growth) approach Johnson 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 Johnson's cost of internal equity? 19.59% 15.24% 18.14% 14.51% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three available methods to generate such an estimate: Carry forward a historical realized growth rate, and apply it to the future. . Locate and apply an expected future growth rate prepared and published by security analysts. Use the retention growth model. Su pose Johnson is currently distributing 40% of its earnings in the form of cash dividends. It has also historically generated an average return on equity (ROE) of 22%. Johnson's estimated growth rate is The cost of equity using the discounted cash flow (or dividend growth) approach Johnson 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 Johnson's cost of Internal equity? 19.59% 15.24% 18.14% 14.51% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach In general, there are three available methods to generate such an estimate: Carry forward a historical realized growth rate, and apply it to the future. Locate and apply an expected future growth rate pe 82.00 ind published by security analysts. Use the retention growth model. 22.60 21.40 13.2 Suppose Johnson is currently distributing 40% of its earn equity (ROE) of 22%. Johnson's estimated growth rate is Je form of cash dividends. It has also historically generated an average return on %
