1.

Summerdahl Resort's common stock is currently trading at $25 a share. The stock is expected to pay a dividend of $1.25 a share at the end of the year (D₁= $1.25), and the dividend is expected to grow at a constant rate of 4% a year. What is the cost of common equity? Round your answer to two decimal places.

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2.

Suppose r_RF = 4%, r_M = 9%, and r_A = 8%.

1. Calculate Stock A's beta. Round your answer to one decimal place.

2. If Stock A's beta were 1.1, then what would be A's new required rate of return? Round your answer to one decimal place.

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