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The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 7% per year. Carpettos common stock currently sells for
- The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 7% per year. Carpettos common stock currently sells for $23.00 per share; its last dividend was $2.00; and it will pay $2.14 dividend at the end of current year.
- Using the DCF approach, what is its cost of common equity?
- If the firms beta is 1.6, the risk-free rate is 9%. And the average return on market is 13%, what will be the firms cost of common equity using the CAPM approach?
- If the firms bonds earn a return of 12% and risk premium of 4%, based on the bond-yield-plus-risk-premium approach, what will be the ks?
- If you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpettos cost of common equity?
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