The DCF approach for estimated the cost of retained earnings, rs, is given as follows: rs=r^s=D1/P0+ExpectedgL Investors expect to receive a dividend yield, P0D1, plus a capital gain, g, for a total expected return. In , this expected return is also equal to the required return. It's easy to calculate the methods. Judgment is important and comes into play here, as is true for most decisions in finance. CAPM cost of equity: % Bond yield plus risk premium % DCF cost of equity: % What is your best estimate of the firm's cost of equity? -Select- The best estimate is the highest percentage of the three approaches. The best estimate is the average of the three approaches. The best estimate is the lowest percentage of the three approaches