The cost of retained earnings a firm cannot invest retained earnings to earn a rate of return the required rate of return on retained eomings, it Mouid return those funds to its stockholders. The cost of equity using the CAPM approach The curtent thkk-free rate of return (ris) is 4.67% whice the market risk premium is 6.63%. The D'Amico Company has a beta br 0.78, Using the capital asset pricing model (CAPM) approach, O'Amico's cost of equity is The cost of equity using the bond yieid plus risk premium approach The Hoover Company is dosely held and, therefore, cannot generate reliable inguts with which to use the CADM method for eatimating a company's cost of internal equity. Hoover's bonds vield 10,28\%, and the firm's anaivets estimate that the firms ritk premium on its stock over its bonds is 3.55\%. Based on the bond veld-plus risk-premium spproach, Hoeverit cost of intemal equity is: The cost of equity using the discounted cash flow (or dividend growth) approach Tucker 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 Tucker's cost of internal equity? 22.17%15.60%16.42%20.53% Estimating growth rates It is often aitficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three avaliable methods to generate such an estimate: - Carry forward a tistrticical 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 Tucker is currently distributing 45% of is earnings in the form of cash dividends. it has atio histonically generated an average return on equity (ROE) of 24%. Tucker's estimated growth rate is