Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM,...

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Quantitative Problem: Barton Industries estimates its cost ofcommon equity by using three approaches: the CAPM, thebond-yield-plus-risk-premium approach, and the DCF model. Bartonexpects next year's annual dividend, D1, to be $1.60 and it expectsdividends to grow at a constant rate g = 5.1%. The firm's currentcommon stock price, P0, is $29.00. The current risk-free rate, rRF,= 4.4%; the market risk premium, RPM, = 5.7%, and the firm's stockhas a current beta, b, = 1.3. Assume that the firm's cost of debt,rd, is 7.51%. The firm uses a 3.7% risk premium when arriving at aballpark estimate of its cost of equity using thebond-yield-plus-risk-premium approach. What is the firm's cost ofequity using each of these three approaches? Round your answers to2 decimal places. CAPM cost of equity: % Bond yield plus riskpremium: % DCF cost of equity: % What is your best estimate of thefirm's cost of equity? -Select-The best estimate is the highestpercentage of the three approaches.The best estimate is the averageof the three approaches.The best estimate is the lowest percentageof the three approaches.

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Quantitative Problem: Barton Industries estimates its cost ofcommon equity by using three approaches: the CAPM, thebond-yield-plus-risk-premium approach, and the DCF model. Bartonexpects next year's annual dividend, D1, to be $1.60 and it expectsdividends to grow at a constant rate g = 5.1%. The firm's currentcommon stock price, P0, is $29.00. The current risk-free rate, rRF,= 4.4%; the market risk premium, RPM, = 5.7%, and the firm's stockhas a current beta, b, = 1.3. Assume that the firm's cost of debt,rd, is 7.51%. The firm uses a 3.7% risk premium when arriving at aballpark estimate of its cost of equity using thebond-yield-plus-risk-premium approach. What is the firm's cost ofequity using each of these three approaches? Round your answers to2 decimal places. CAPM cost of equity: % Bond yield plus riskpremium: % DCF cost of equity: % What is your best estimate of thefirm's cost of equity? -Select-The best estimate is the highestpercentage of the three approaches.The best estimate is the averageof the three approaches.The best estimate is the lowest percentageof the three approaches.