Thue or False: It is free for a company to rase money through retained eamings, because retained earnings represent money that is icft over after dividends are paid out to shareholders. False True The cost of equity using the CADM approach The current risk-free rate of retum (rux) is 4.67% while the market risk premium is 6.17\%. The Jefferson Company has a beta of o.78. Using the capital asset pricing model (CAPM) approach, Jefferson's cost of equity is The cost of equity using the bond yield plus risk premium approach The taylor Cornpany is closely held and, therefore, cannot generate reliable inputs with which to use the capM method for estimating a company's cost of internal equity. Taylor's bonds yield 11.52\%, and the firm's analysts estirnate that the firm's risk premium on its stock over its bonds is 3.55\%. Based on the bond-yield-plus-risk premium approach, Taylor's cost of internat equity is: 15.07% 16.56% 13,03% 18.847 The cost of equity using the discounted cash flow (or dividend growth) approach Tucker Enterprises's stock is currently selling for $25.67 per share, and the firm expects its per-share dividend to be $1.38 in one year, Analysts project the firm's growth rate to be constant at 5.7244 . Estimating the cost of equity using the discounted cash flow (or dividend growth] approach. what is Tucker's cost of intemal equity? The cost of equity using the discounted cash flow (or dividend growth) approach Tucker. Enterprises's stock is currentiy seiling for $25.67 per share, and the firm expects its per-share dividend to be 51.35 in one year. Analysts project the firm's growth rate to be constant at 5.72%, Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Tucker's cost of internal equity? 11.10%14.99%11.66%413.88% Lstimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the Dof or DG appeoach. In general, there are three avaiable metheds to generate such an estimate: - Carry forward a historical realured growth fate, and apply it to the future. - Locate and apply an expected future growth rate prepared and publshed by security analysts. - Use the retention arowth model. Suppose fucker is currently distributing 40% of its earnings in the form of cash dividends. It has also historically generated an average return on equaty (qot) of 24 s. Tucker's estimated growth rate is