The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 8% per year. Callahan's common stock currently sells for $25.25 per share; its last dividend was $1.50; and it will pay a $1.62 dividend at the end of the current year. 1. Using the DCF approach, what is its cost of common equity?
2. If the firm's beta is 0.80, 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?
3. If the firm's bonds earn a return of 12%, based on the bond-yield-plus-risk-premium approach, what will be rs?
4. If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity?

Afirm's before-tax cost of debt, rd, is the interest rate that the firm must pay on debt. because interest is tax deductible, the relevant cost of debt used to calculate a firm's wacc is the cost of debt, rd (1 – t). the cost of debt is used in calculating the wacc because we are interested in maximizing the value of the firm's stock, and the stock price depends on cash flows. it is important to emphasize that the cost of debt is the interest rate on debt, not debt because our primary concern with the cost of capital is its use in capital budgeting decisions. the rate at which the firm has borrowed in the past is because we need to know the cost of capital. for these reasons, the on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the . the on the company's -term debt is generally used to calculate the cost of debt because more often than not, the capital is being raised to fund -term projects. quantitative problem: 5 years ago, barton industries issued 25-year noncallable, semiannual bonds with a $1,600 face value and a 8% coupon, semiannual payment ($64 payment every 6 months). the bonds currently sell for $845.87. if the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? round your answer to 2 decimal places. do not round intermediate calcu

If an investment has 35 percent more nondiversifiable risk than the market portfolio, its beta will be:

When patey pontoons issued 4% bonds on january 1, 2018, with a face amount of $660,000, the market yield for bonds of similar risk and maturity was 5%. the bonds mature december 31, 2021 (4 years). interest is paid semiannually on june 30 and december 31?