The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 3% per year in the future. Shelby's common stock sells for $29 per share, its last dividend was $3.00, and the company will pay a dividend of $3.09 at the end of the current year.

1. Using the discounted cash flow approach, what is its cost of equity?
2. %
3. If the firm's beta is 1.5, the risk-free rate is 8%, and the expected return on the market is 13%, then what would be the firm's cost of equity based on the CAPM approach?
4. %
5. If the firm's bonds earn a return of 10%, then what would be your estimate of rsusing the own-bond-yield-plus-judgmental-risk-premium approach? (Hint:Use the mid-point of the risk premium range.)
6. %
7. On the basis of the results of parts a-c, what would be your estimate of Shelby's cost of equity? Assume Shelby values each approach equally.
8. %