The earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow at 6% per year in the future. Carpetto’s common stock sells for $27.25 per share, its last dividend was $2.50, and it will pay a dividend of $2.65 at the end of the current year.a. Using the DCF approach, what is its cost of common equity? Round your answer to two decimal places. %b. If the firm’s beta is 1.90, the risk-free rate is 3%, and the average return on the market is 14%, what will be the firm’s cost of common equity using the CAPM approach? Round your answer to two decimal places. %c. If the firm’s bonds earn a return of 9%, what will rs be based on the bond-yield-plus-risk-premium approach, using the midpoint of the risk premium range as suggested in studies? Round your answer to two decimal places. %d. Assuming you have equal confidence in the inputs used for the three approaches, what is your estimate of Carpetto’s cost of common equity? Round your answer to two decimal places.
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