The earnings, dividends, and stock price of Shelby Inc. are expected to grow at $4\%$ per year in the

future. Shelby's common stock sells for $$24$ per share, its last dividend was $$2\mathrm{.}00,$ and the company

will pay a dividend of $$2\mathrm{.}08$ at the end of the current year.

a$.$ Using the discounted cash flow approach, what is its cost of equity? Round your answer to two

decimal places.

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b$.$ If the firm's beta is $1\mathrm{.}4,$ the risk$-$free rate is $10\%,$ and the expected return on the market is $13\%,$

then what would be the firm's cost of equity based on the CAPM approach? Round your answer to

two decimal places.

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c$.$ If the firm's bonds earn a return of $10\%,$ then what would be your estimate of $r_s$ using the own$-$

bond$-$yield$-$plus$-$judgmental$-$risk$-$premium approach? $($Hint: Use the mid$-$point of the risk premium

range.$)$ Round your answer to two decimal places.

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d$.$ 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. Round your answer to two decimal places.

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