Donut Delites has a beta of 1.06, a dividend growth rate of 1.2 percent, a stock price of $12a share, and an expected annual dividend of $.68 per share next year. The market rate of return is 11.4 percent and the risk-free rate is 3.8 percent. What is the firm's cost of equity?

7.74 percent

9.36 percent

9.30 percent

9.72 percent

7.46 percent