Yenetian, Inc. paid a dividend of $2.40 last year (D.-$2.40), currently has a stock price of $48, and a growth rate of 5%. In addition, Venetian stock has an estimated beta of 1.5 as computed by a leading investment service. The present risk-free rate is 4%, and the expected return on the

stock market is 13%.

What is Venetian's cost of retained carings using the DCF method?

7. Venetian, Inc. paid a dividend of $2.40 last year (D0=$2.40), currently has a stock price of $48, and a growth rate of 5%. In addition, Venetian stock has an estimated beta of 1.5 as computed by a leading investment service. The present risk-free rate is 4%, and the expected return on the stock market is 13%. a. What is Venetian's cost of retained earnings using the DCF method? (6 points) b. What is Venetian's cost of retained earnings using the CAPM? (6 points) Why must the cost of new common stock be higher than the cost of retained earnings? (3 points)