termediate Prablems COST OF COMMON EQUITY The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 7% per year. Carpetto's common stock currently sells for $23.00 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the end of the current year. a. Using the DCF approach, what is its cost of common equity? b. If the firm's beta is 1.6, the risk-free rate is 9%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM approach? If the firm's bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be r,? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. 10-6 d. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto's cost of common equity? Evanec Company's