The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): the CAPM method,the dividend growth method,and the bond-yield-plus-risk-premium method.Since we cannot be sure that the estimate obtained with any of these methods is correct,it is often appropriate to use all three methods,then consider all three estimates,and end up using a judgmental estimate when calculating the WACC.

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The text does identify three methods for estimating the cost of common stock from reinvested earnings and suggests that it may be appropriate to use all three before making a judgmental estimate for the WACC.

The Text Identifies Three Methods for Estimating the Cost of Common