As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. The company's common stock is currently selling in the market for $49.25 per share. It offered dividends at the end of last year of $2.14 per share, which is expected to grow at a constant rate of 7.66% for the forseeable future. Based on the DCF approach, what is the cost of common from reinvested earnings?

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Correct Answer:

12.34