Consider the following dividend and price data for Chrysler:

Use the Gordon model to calculate Chryslers cost of equity at end-1996 on the basis of dividends only. Use both 5 years and 10 years of historical dividend growth rates.

CHRYSLER CORPORATION (C) Year-end Dividend Growth stock price r share rate Year 2 3 4 5 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 0.40 0.50 25.00%