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The current risk-free rate of return (rpe) is 3.86% while the market risk premium is 6.17%. The itoosevelt Companiy has a beta of 0.78 . Using the capital asset pricing model (CMMM) approach, Roosevelt's cost of equity is cost of internal equity. Lincoln's bonds vicld 11,52%, and the firm's analys. 7,803% hat the firmis risk, premium on its stock over its bonds is The cost of equity using the discounted cash flow (or dividend orowth) approach Grant Enterprises's stock is currently selling for $25,67 per share, and the firm expects its per-share dlvidend to be $1,38 in one year. Analysts project the firm's growth rate to be constant at 5.72%. Eitimtating the eost of equity using the discounted cash flow (or dividend oronth) approach, what is Grant's cost of internai equity? The Lincoln Company is dosely held and, therefore, cannot qenerate reliable inputs with which to use the CApM method for estimating a compamy's cost of internal equity. Uncoln's bonds yieid 11.52%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 3.55\%. Based on the bond-yield-plus-risk-premium approach, Lincoln's cost of internal equity is: The cost of equity using the discounted cash flow (or dividend growth) approach Grant Enterprises's stock is currently selling for $25.67 per share, and the firm expects its per-share dividend to be $1.38 in one year. Analysts project the firm's growth rate to be constant at 5.72\%. Estimating the cost of equity using the discounted cash flow (or dividend growth) approach, what is Grant's cost of internal equity? 10.5546 13.88% 11.1064 11.66w 10.55% 13.88% 11.10% 11.66% Estimating growth rates It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the oCF or Ds approach. In general, there are three avallable methods to oenerate such an estimate: - Carry forward a historical realized orowth rate, and apply it to the future. - Locate and apply an expected future growth rate prepared and published by security aralysts. - Use the retention growth mode. Suppose Grant is currently distributing 50% of its earnings in the form of cach dividends. It has also historically generated an average retuin on equity (ROE) of 1204. Grant's estimated growth rate is

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