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The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The current risk-free rate of return
The cost of raising capital through retained earnings is the cost of raising capital through issuing new common stock. The current risk-free rate of return is 4.20% and the current market risk premium is 6.10%. Fuzzy Button Clothing Company has a beta 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Fuzzy Button's cost of equity is Green Caterpillar Garden Supplies Inc. is closely held and, as a result, cannot generate reliable inputs for the CAPM approach. Green Caterpillar bonds yield 10.20%, and the firm's analysts estimate that the firm's risk premium on its stock relative to its bonds is 3.00%. Using the bond-yieldplus-risk-premium approach, the firm's cost of equity is The stock of Blue Hamster Manufacturing Inc. is currently selling for $32.45, and the firm expects its dividend to be $1.38 in one year. Analysts project the firm's growth rate to be constant at 7.20%. Using the discounted cash flow (DCF) approach, Blue Hamster's cost of equity is estimated to be
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