Suppose you must estimate the cost of equity for a firm, and you have the...
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Suppose you must estimate the cost of equity for a firm, and you have the following data: rRF = 5.0%; rM rRF = 4%; b = 0.9; D1 = $2.00; P0 = $50.00; g = 5%; and rd = the firm's bond yield = 5.8%. What is this firm's cost of equity using the bond-yield-plus-risk-premium approach? Assume a 3% judgmental risk premium in your calculation.
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