Bunkhouse Electronics is a recently incorporated firm that makes electronic entertainment systems. Its earnings and dividends have been growing at a rate of 30%,
and the current dividend yield is 3%. Its beta is 1.0, the market risk premium is 10%, and the risk-free rate is 5%. a-1. Calculate the firms cost of equity by
using the Dividend Discount Model. Cost of equity %_______ a-2. Calculate the firms cost of equity by using the CAPM. (Do not round intermediate calculations.
Round your answer to 1 decimal place.) Cost of equity % _______ b. Which estimate seems more reasonable to you? Dividend Discount Model or CAPM
and the current dividend yield is 3%. Its beta is 1.0, the market risk premium is 10%, and the risk-free rate is 5%. a-1. Calculate the firms cost of equity by
using the Dividend Discount Model. Cost of equity %_______ a-2. Calculate the firms cost of equity by using the CAPM. (Do not round intermediate calculations.
Round your answer to 1 decimal place.) Cost of equity % _______ b. Which estimate seems more reasonable to you? Dividend Discount Model or CAPM
