Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $2.10 and it expects dividends to grow at a constant rate g = 4.4%. The firm's current common stock price, P0, is $25.00. The current risk-free rate, rRF, = 4.7%; the market risk premium, RPM, = 6.0%, and the firm's stock has a current beta, b, = 1.15. Assume that the firm's cost of debt, rd, is 11.00%. The firm uses a 3.0% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is th

You know that the return of Carla Vista Cyclicals common shares is 1.6 times as sensitive to macroeconomic information as the return of the market. If the risk-free rate of return is 2.80 percent and market risk premium is 5.71 percent, what is Carla Vista Cyclicals' cost of common equity capital? (Round intermediate calculation to 5 decimal places, e.g. 1.25140 and final answer to 2 decimal places, e.g. 15.25%.) Cost of common equity capital %

Suppose you are considering two possible investment opportunities: a 12-year Treasury bond and a 7-year, A-rated corporate bond. The current real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years, 3% for the following 4 years, and 4% thereafter. The maturity risk premium is estimated by this formula: MRP = 0.02(t - 1)%. The liquidity premium (LP) for the corporate bond is estimated to be 0.3%. You may determine the default risk premium (DRP), given the company's bond rating, from the following table. Remember to subtract the bond's LP from the corporate spread given in the table to arrive at the bond's DRP.       Corporate Bond Yield   Rate Spread = DRP + LP U.S. Treasury 0.83 % — AAA corporate 1.03   0.20 % AA corporate 1.39   0.56   A corporate 1.79   0.96     What yield would you predict for each of these two investments? Round your answers to three decimal places. 12-year Treasury yield: fill in the blank _ % 7-year Corporate yield: fill…

Quantitative Problem: Barton Industries estimates its cost of common equity by using three approaches: the CAPM, the bond-yield-plus-risk-premium approach, and the DCF model. Barton expects next year's annual dividend, D1, to be $2.20 and it expects dividends to grow at a constant rate g = 5.9%. The firm's current common stock price, P0, is $29.00. The current risk-free rate, rRF, = 4.7%; the market risk premium, RPM, = 6%, and the firm's stock has a current beta, b, = 1.2. Assume that the firm's cost of debt, rd, is 8.69%. The firm uses a 4% risk premium when arriving at a ballpark estimate of its cost of equity using the bond-yield-plus-risk-premium approach. What is the firm's cost of equity using each of these three approaches? Round your answers to two decimal places. CAPM cost of equity:  % Bond yield plus risk premium:  % DCF cost of equity:  %   What is your best estimate of the firm's cost of equity?-Select- (The best estimate is the highest percentage of the three…