The cost of raising copital through retained earnings is the cost of raising capital through issuing new common stock. The cost of equity using the CAPM approach The current risk-free rate of return (rikp) is 4.23% while the market risk premium is 5.75%. The Monroe Company has a beta of 1.56 . Using the capital asset pricing model (CAPM) approach, Monroe's cost of equty is The cost of equity using the bond yield plus risk premium approach The Jockson Company is closely held and, therefore, cannot generate reliable inputs with which to ise the CAPM method for estimoting a company's cost of internat equity, Jackson's bonds yield 10.28%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 5.89. Eased on the bond-yield-plus-risk-premium approsch, Jackson's cost of internal equity is: 20.21% 16.17% 19.40% 17,79% The cost of equity using the discounted cash flow (or dividend growth) approach Grant Enterprises's stock is currently selling for $25.67 per share, and the firm expects its per-share dividend to be $2.35 in one year. Analysts project the firm's growth rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Grant Enterprises s stock is currently selling for $25,67 per share, and the firm expects its per-share dividend to be $2,35 in one year. Analysts project. the firm serowh rate to be constant at 7.27%. Estimating the cost of equity using the discounted cash flow (or dividend growh) approach, what is Grant's cost of internal equity? 16.42% 22.174 20.53% 17.24% Estimating growth rates It is often dimait to estimate the expected future dividend growth rate for use in estimating the cast of existing equity using the DCF or DC approach. In generat, there are three availoble methods to generate such an estimate: - Carry forward a historical realized growth rate, and apply it to the future. - Locate and apply an expected future growth rate prepared and published by security analysts. - Use the retention growth model. Suppose Grant is currently distributing 50% of its earnings in the form of cash dividends. th has also historically generated an average return on equity (ROE) of 22%. Grant's estimated growth rate is \$