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The Carpetto's stock currently sells for $23 per share, will pay a dividend of $2.14 at the end of the current year, and the dividend
The Carpetto's stock currently sells for $23 per share, will pay a dividend of $2.14 at the end of the current year, and the dividend is expected to grow at 7 percent per year in the future. a. Using the DDM approach, what is its cost of common equity? b. If the firm's beta is 1.6, the risk-free rate is 9 percent, and the average return on the market is 13 percent, what will be the firm's cost of common equity using the CAPM approach? c. If the estimated cost of equity is not the same using the CAPM and DDM approaches, how we can decide on the proper value for cost of equity? Explain
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