1. 14.1 Calculating the cost of equity Suppose shares in Watta Company have a beta of 0.80. The market risk premium is 6 per cent and the risk-free rate is 6 per cent. Watta’s last dividend was $1.20 per share and the dividend is expected to grow at 8 per cent indefinitely. The shares currently sell for $45 each. What is Watta’s cost of equity capital?