(Related to Checkpoint 14.2 and Checkpoint 14.3) (Cost of common equity) The common stock for the Hetterbrand Corporation sells for $60.00, and the last dividend paid was $2.25. Five years ago the firm paid $1.90 per share, and dividends are expected to grow at the same annual rate in the future as they did over the past five years. a. What is the estimated cost of common equity to the firm using the dividend growth model? b. Hetterbrand's CFO has asked his financial analyst to estimate the firm's cost of common equity using the CAPM as a way of validating the earlier calculations. The risk-free rate of interest is currently 4.5 percent, the market risk premium is estimated to be 5.0 percent, and Hetterbrand's beta is 0.80. What is your estimate of the firm's cost of common equity using this method? a. The estimated cost of common equity to the firm using the dividend growth model is %. (Round to two decimal places.) (Weighted average cost of capital) Bane Industries has a capital structure consisting of 60 percent common stock and 40 percent debt. The firm's investment banker has advised the firm that debt issued with a $1,000 par value, 8.0 percent coupon (interest paid semiannually), and maturing in 20 years can be sold today in the bond market for $1,100. Common stock of the firm is currently selling for $80.00 per share. The firm expects to pay a $2.00 dividend next year. Dividends have grown at the rate of 8.0 percent per year and are expected to continue to do so for the foreseeable future. What is Bane's average cost of capital where the firm faces a tax rate of 34 percent? a. The after-tax cost of debt is %. (Round to two decimal places.)