If a firm cannot invest retained earnings to earn a rate of return greater than or equal to the required rate of return on retained earnings, it should return those funds to its stockholders.The current risk-free rate of return is 4.6%. The market risk premium is 6.1%. Allen Co. has a beta of 1.56. Using the Capital Asset Pricing Model (CAPM) approach, Allen's cost of equity is_____.Cano Co. is closely held and, consequently, cannot generate reliable inputs for the CAPM approach. Cano's bonds yield 10.2%, and the firm's analysts estimate that the firm's risk premium on its stock over its bonds is 4.5%. Using the bond-yield-plus-risk-premium approach, find the firm's cost of equity:a. 17.6%b. 14.7%c. 18.4%d. 14.0%Kirby Co.'s stock is currently selling for $25.67, and the firm expects its dividend to be $2.35 in one year. Analysts project the firm's growth rate to be constant at 7.2%. Using the discounted cash flow (DCF) approach, what is Kirby's cost of equity?
