Mackenzie Company has a price of $34 and will issue a dividend of $2.00 next year. It has a beta of 1.1, therisk-free rate is 5.8%, and the market risk premium is estimated to be 4.7%.

a. Estimate the equity cost of capital for Mackenzie.

b. Under theCDGM, at what rate do you need to expectMackenzie's dividends to grow to get the same equity cost of capital as in part (a)?

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