Sabrina's just paid an annual dividend of $1.79 per share. This dividend is expected to increase by 2.5 percent annually. Currently, the firm has a beta of .87 and a stock price of $31 a share. The risk-free rate is 4.5 percent and the market rate of return is 11.8 percent. What is the cost of equity capital for Sabrina's? I calculated as follows but it is not correct can you tell me where I am going wrong.

R_E = R_F + B_E x (R_M - R_F)

= 4.5 + .87 x (11.8-4.5)

= 10.85 %