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Pan American Airlines' shares are currently trading at $70.15 each. The market yield on Pan Am's debt is 6% and the firm's beta is 1.5.

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Pan American Airlines' shares are currently trading at $70.15 each. The market yield on Pan Am's debt is 6% and the firm's beta is 1.5. The T-Bill rate is 2 5% and the expected return on the market is 7 25%. The company's target capital structure is 45% debt and 55% equity. Pan American Airlines pays a combined federal and state tax rate of 30% What is the estimated cost of common equity employing the constant growth dividend discount model? Assume that Pan Am pays annual dividends and that the last dividend of $2.02 per share was paid yesterday Pan Am started paying dividends 6 years ago The first dividend was $1.26 per share. Employing the constant growth dividend discount model, the estimated cost of common equity for Pan Am is %. (Round to two decimal places.)

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