The cost of retained earnings True or False: It is free for a company to raise money through retained earnings, because retained earnings represent money that is left over after dividends are paid out to shareholders O True O False The cost of equity using the CAPM approach The yield on a three-month T-bill is 3%, the yield on a 10-year T-bond is 4.30%, the market risk premium 8.17% and the D'Amico Company has a beta of 0.83. Using the Capital Asset Pricing Model (CAPM) approach, D'Amico's cost of equity is The cost of equity using the bond yield plus risk premium approach In contrast, the Kennedy Company is closely held and, therefore, cannot generate reliable inputs with which to apply the CAPM method to estimate its cost of internal equity (retained earnings). However, its management knows that its outstanding bonds are currently yielding 9.88%, and the firm's analysts estimate that the risk premium of its stocks over its bonds is currently 1.53%. As result, Kennedy's cost of internal equity (rs)-based on the own-bond-yield-plus-judgemental-risk-premium approach-is: 11.41% 13.69% 12.55% 14.26%