where does the 0.04 (4%) come from on c. ??

10-6 COST OF COMMON EQUITY The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 6% per year. Callahan's common stock currently sells for $22.00 per share; its last dividend was $2.00; and it will pay a $2.12 dividend at the end of the current year. a. Using the DCF (discounted cash flow) approach, what is its cost of common equity? rs=PnD1+g=$22$2.12+6%=9.6%+6%=15.6%. b. If the firm's beta is 1.2, the risk-free rate is 6%, and the average return on the market is 13%, what will be the firm's cost of common equity using the CAPM(capital asset pricing model) approach? rS=rRF+(rMrRF)D=6%+(13%6%)1.2=6%+(7%)1.2=6%+8.4%=14.4% c. If the firm's bonds earn a return of 11%, based on the bond-yield-plus-risk-premium approach, what will be rss? Use the midpoint of the risk premium range discussed in Section 10-5 in your calculations. rs=Bondrate+Riskpremium 0.11+0.04=0.15=15%