Periodicals Inc. has $420 million of equity and $200M of debt on its balance sheet (all book values). The firm's stock price is $24. The book value of the common stock is $12 per share. The current (year zero) dividends are $1.30 per share and the investors expect these dividends to grow at 4 percent per year. The flotation cost of issuing equity is 7%. Additionally, the firm's beta is 1.15, the risk-free rate is 4%, and the risk premium (i.e., rm-rf) is 5%. The firm's long-term bonds (20 years) carry a coupon of 6% (assume annual payments of the coupon payments), and face (book) value is $1,000. These bonds currently sell for $950. The firm intends to satisfy 75% of its equity needs internally, and the remaining 25% externally. The flotation cost of bonds is 3%. The firm's tax rate is 30%.

E. What is the firm's cost of internal equity using CAPM?

F. What is the firm's cost of external equity using CAPM?