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Suppose you are an analyst with the following data: rRF = 5.5% rM rRF = 6% b=0.8 D1 = $1.00 P0 = $25.00 g =

Suppose you are an analyst with the following data:

rRF = 5.5%

rM rRF = 6%

b=0.8

D1 = $1.00

P0 = $25.00

g = 6%

firms bond yield = 6.5%

a) What is this firms cost of equity using the DCF?

b) What is this firms cost of equity using the bond-yield-plus-risk-premium approach? Use the midrange of the judgmental risk premium for the bond-yield-plus-risk-premium approach.

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