Problem 12-3 Calculating Cost of Equity [LO 1]

Stock in CDB Industries has a beta of 1.13. The market risk premium is 7.3 percent, and T-bills are currently yielding 4.3 percent. CDBs most recent dividend was $3.70 per share, and dividends are expected to grow at a 5.3 percent annual rate indefinitely.

Required:

If the stock sells for $59 per share, what is your best estimate of CDBs cost of equity? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)