The cost of retained earnings The cost of raising capital through retained earnings is less than the cost of raising capital through issuing new common stock The cost of equity using the CAPM approach The yield on a three-month T-bilis 4%, the yield on a 10-year T-bond is 4.72%. The market risk premium is 8.98% and the Roosevelt Company has a beta of 0.78. Using the Capital Asset Pricing Model (CAPM) approach, Roosevelt's cost of equity is 12.31% The cost of equity using the bond yield plus risk premium approach In contrast, the Kennedy Company is closely held and therefore, cannot generate reliable inputs with which to apply the CAPM method to estimate its cost of internal equity (retained earnings). However, its management knows that its outstanding bonds are currently yielding 10.85%, and the firm's analysts estimate that the risk premium of its stocks over its bonds is currently 1,43%. As result, Kennedy's cost of internal equity (6.)-based on the own-bond-yield-plus-judgemental-risk premium approach-is: 11.67% 13,51% 14.74% 12.28% The cost of equity using the discounted cash flow (or dividend-yield-plus-growth-rate) approach Kirby Enterprises's stock is currently selling for $21.75 per share, and the firm expects its per share dividend to be $3.25 in one year. Analysts project the firm's growth rate to be constant at 6.20%. Usha the discounted cash Mow (or dividend yield-plus-growth-rate) approach, what is Kirby's cost of Internal equity? 22.20% 17.9796 21.14% 20.08% Estimating growth rates It is often dicult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF (or dividend- yield-plus-growth-rate) approach. In general, there are three available methods to generate such an estimate Carry forward a historical realized growth rate, and apply it to the future. . Locate and apply an expected future growth rate prepared and published by security analysts. . Use the retention growth model Suppose Kirby Enterprises's is currently distributing 70% of its earnings as cash dividends. It has also historically generated an average return on equity (ROE) of 10.50%. It is reasonable to estimate Kirby's growth rate is