Runtan Inc. has just paid an annual dividend of $0.45 per share. Analysts expect the firm's dividends to grow by 3% forever. Its stock price is $37.9 and its beta is 1.1. The risk-free rate is 2% and the expected return on the market portfolio is 8%.

Attempt 1/1 for 10 pts.

Part 1

What is the best guess for the cost of equity?