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You have obtained the following data for a firm: (1) Yield on the firm’s bonds =...

You have obtained the following data for a firm: (1) Yield on the firm’s bonds = 7.00% and the risk premium over its own debt cost = 4.00%. (2) Risk free rate = 3.00%, market risk premium = 6.00%, and beta = 1.35 (3) Current dividend per share = $1.20, current stock price = $35.00, and dividend growth rate = 5.00% (constant). You were asked to estimate the cost of common equity based on the constant-growth model and CAPM and then to indicate the difference between the two. What is the difference?
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