Condensed 2021 Balance Sheet

	2021
Current assets	$2,000
Net Fixed assets	3,000
Total assets	$5,000
Accounts payable and accurals	$900
Short term debt	100
Long term debt	1,100
Preferred Stock (10,000 shares)	250
Common Stock (50,000 shares)	1,300
Retained earnings	1,350
Total common equity	$2,650
Total liabilities and equity	$5,000

Sunrises earnings per share last year were $3.20. The common stock sells for $52.00, last years dividend (D₀)was $2.25, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 8.8%. Sunrises preferred stock pays a dividend of $2.90 per share, and its preferred stock sells for $25.00 per share. The firms before-tax cost of debt is 12%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5.2%, the risk-free rate is 5.5%, and Sunrises beta is 1.526. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals $1.2 million.

Now calculate the cost of common equity from retained earnings, using the CAPM method. ______