Hideaway Hotels has paid dividends of $0.20, $0.25, $0.32, and $0.40 a share over the past number of years. The company estimates that future increases in its dividends will be equal to the arithmetic average growth rate over these years. The stock is currently selling for $25.00 a share.

Required:

Compute the cost of equity for this firm.

(Please show all workings clearly and label all numbers used)