Setia Alam Berhad just paid an annual dividend of RM3.45 per share. This dividend is

expected to increase by 2.65 percent annually. Currently, the firm has a beta of 1.60

and a stock price of RM48 a share. The risk-free rate is 5.8 percent and the market rate

of return is 13.8 percent.

(i) Evaluate the cost of equity capital for this firm using Capital Asset Pricing Model

(CAPM).

(4 marks)

(ii) Evaluate the cost of equity capital for this firm using Dividend Growth Model.

(4 marks)

(iii) Calculate the average of the cost of equity capital.