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P14-3 Calculating Cost of Equity Stock of Dragula Industries has a beta of 1.1 Market risk premium is 7% T-Bills are currently yielding 4.5% Companys

P14-3 Calculating Cost of Equity

Stock of Dragula Industries has a beta of 1.1

Market risk premium is 7%

T-Bills are currently yielding 4.5%

Companys most recent dividend was $1.70 per share

Dividends are expected to grow at a 6% annually indefinitely

If stock sells for $39.00 per share, what is your best estimate of the companys cost of equity?

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