You estimated the required rate of return on your company for capital budgeting purposes using the bond yield plus risk premium method. You assumed a bond yield of 5%, however, the Fed subsequently raised rates by an additional 3% since then. What are the implications, if any? Choose the best answer.

Question 9 options:

	Bond yields will now be higher after the Fed raises rates, so this measure of Rs will increase. You should have used CAPM, which is not affected by changes in bond yields. The implication is you have a poor estimate of the cost of equity.
	You should have used CAPM, it wouldn't be affected by rates.
	The Gordon Growth (constant growth) version of the dividend discount method would have been a better choice because it is invariant to changes in bond rates. This would have been a better choice. The implication is a bad cost of equity measure by not using this method.