Calculate Cost of Common Equity using CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow Model) and Bond Yield Risk Premium CAPM data: VEC’s beta = 1.2 The yield on T-bonds = 3% Market risk...

Calculate Cost of Common Equity using CAPM (Capital Asset Pricing Model), DCF (Discounted Cash Flow Model) and Bond Yield Risk Premium

CAPM data:

VEC’s beta = 1.2

The yield on T-bonds = 3%

Market risk premium = 7%

DCF data:

Stock price = $27.08

Last year’s dividend (D0) = $2.10

Expected dividend growth rate = 4%

Bond-yield-plus-risk-premium data:

Risk premium = 5.5%

Amount of retained earnings available = $80,000

Floatation cost for newly issued shares = 7%