Problem 14-23 Calculating the Cost of Equity [LO1]

Berta Industries stock has a beta of 1.25. The company just paid a dividend of $0.40, and the dividends are expected to grow at 5 percent. The expected return on the market is 12 percent, and Treasury bills are yielding 5.0 percent. The most recent stock price for Berta is $67.

a.	Calculate the cost of equity using the DCF method. (Round your answer to 2 decimal places. (e.g., 32.16))

DCF method

%

b.	Calculate the cost of equity using the SML method. (Round your answer to 2 decimal places. (e.g., 32.16))

SML method

%