ABC corporation has a beta of 1.5 and a current stock price of $50. The company is expected to pay a dividend of $1 one year from today. In addition, the company expects the dividend to grow at a rate of 3% per year thereafter. The risk-free rate in the economy is 0.5% while the market risk premium is 3%. Based on this information, answer the following questions.

What is the company's cost of equity according to the CAPM model?

A. 5% B. 0.5% C. 3% D. 4.5%

What is the company's cost of equity according to the CDGM?

A. 5% B. 3% C. 1% D. 6%

What growth rate (approximately) for its dividend should ABC choose in order to guarantee that the cost of equity for the CDGM would be equal to the estimate using the CAPM method?

A. 0% B. 3% C. 6% D. 5%