2. The Discounted Cash Flowmodel (referred to as the Direct Dividend Model in the MBA 620 course materials) is preferred by wealthy investors.The formula reduces to rs = (D1 / P0 ) + g where rsis the required return on equity or the Cost of Equity, D1 is the expected future dividend, P0 is the rice of the stock today and g is the expected growth in dividends.The CFO notes that the expected future dividend is $2.38 and the expected growth rate is 7%.Please use $135 per share as the stock price.Calculate the cost of equity rs using the DCF approach.