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The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8 % per year. Callahan's common stock currently sells
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow per year. Callahan's
common stock currently sells for $ per share; its last dividend was $; and it will pay a $ dividend at the end of the
current year.
a Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two
decimal places.
b If the firm's beta is the riskfree rate is and the average return on the market is what will be the firm's cost of
common equity using the CAPM approach? Round your answer to two decimal places.
c If the firm's bonds earn a return of based on the bondyieldplusriskpremium approach, what will be Use the
judgmental risk premium of in your calculations. Round your answer to two decimal places.
d If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common
equity? Do not round intermediate calculations. Round your answer to two decimal places.
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