The Blue Dog Company has common stock outstanding that has a current price of $20 per share and a $0.5 dividend. Blue Dogs dividends are expected to grow at a rate of 3% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market premium is 5%. The beta on Blue Dogs stock is 1.2.

a. What is the cost of equity for Blue Dog using the dividend valuation model?

b. What is the cost of equity for Blue Dog using the capital asset pricing model?