The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby’s common stock sells for $23 per share, its last dividend was $2.00, and the company...

The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7%
per year in the future. Shelby’s common stock sells for $23 per share, its last dividend was $2.00, and the company will pay a dividend of $2.14 at the end of the
current year.
a. Using the discounted cash flow approach, what is its cost of equity?
b. If the firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on the
market is 13%, what will be the firm’s cost of equity using the CAPM
approach?
c. If the firm’s bonds earn a return of 12%, what will rs be using the bond-yieldplus-risk-premium approach? (Hint: Use the midpoint of the risk premium
range.)
d. On the basis of the results of parts a through c, what would you estimate
Shelby’s cost of equity to be