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Banyan Co$.$s common stock currently sells for $$53\mathrm{.}25$ per share. The growth rate is a constant $8\%,$ and the company has an expected dividend yield of $4\%.$ The expected long$-$run dividend payout ratio is $20\%,$ and the expected return on equity $($ROE$)$ is $10\mathrm{.}0\%.$ New stock can be sold to the public at the current price, but a flotation cost of $15\%$ would be incurred. What would be the cost of new equity? Do not round intermediate calculations. Round your answer to two decimal places.

The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow $5\%$ per year. Callahan's common stock currently sells for $$23\mathrm{.}50$ per share; its last dividend was $$1\mathrm{.}80$; and it will pay a $$1\mathrm{.}89$ dividend at the end of the current year.

Using the DCF approach, what is its cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

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If the firm's beta is $1\mathrm{.}4,$ the risk$-$free rate is $4\%,$ and the average return on the market is $12\%,$ what will be the firm's cost of common equity using the CAPM approach? Round your answer to two decimal places.

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If the firm's bonds earn a return of $11\%,$ based on the bond$-$yield$-$plus$-$risk$-$premium approach, what will be rs$?$ Use the judgmental risk premium of $4\%$ in your calculations. Round your answer to two decimal places.

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If you have equal confidence in the inputs used for the three approaches, what is your estimate of Callahan's cost of common equity? Do not round intermediate calculations. Round your answer to two decimal places.

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eBook Problem Walk$-$Through

Jarett & Sons' common stock currently trades at $$35\mathrm{.}00$ a share. It is expected to pay an annual dividend of $$1\mathrm{.}00$ a share at the end of the year $($D$1=$ $$1\mathrm{.}00),$ and the constant growth rate is $4\%$ a year.

What is the company's cost of common equity if all of its equity comes from retained earnings? Do not round intermediate calculations. Round your answer to two decimal places.

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If the company issued new stock, it would incur a $13\%$ flotation cost. What would be the cost of equity from new stock? Do not round intermediate calculations. Round your answer to two decimal places.

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