40. A firm has a beta of 1.2. The market return equals 14% and the risk-free rate of return equals

6%. Calculate the estimated cost of common-stock equity funding on a percentage basis.

B. A firm has common stock with a market price of $25 per share and an expected dividend of $2 per

share at the end of the coming year. The growth rate in dividends has been 5%. Calculate the cost

of the firm