$3.$ Cost of Equity:

Suppose that

$-$ Stock in Matta Ltd$.$ Has a beta of $0\mathrm{.}9$

$-$ Matta Ltd$.$s most recent dividend was $$1\mathrm{.}90$ per share, and dividends are expected to

grow at a $5\%$ annual rate indefinitely.

$-$ The market risk premium is $7\%,$ and T$-$bills are currently yielding $4\%$

If the stock dells for $$40$ per share, what is your best estimate of Marta$$s cost of equity?

Answer: