The Discounted Cash Flow model (referred to as the Direct Dividend Model in the MBA 620 course materials) is preferred by wealthy investors. The formula reduces to rs = (D1 / P0 ) + g where rs is the required return on equity or the Cost of Equity, D1 is the expected future dividend, P0 is the rice of the stock today and g is the expected growth in dividends. The CFO notes that the expected future dividend is $2.38 and the expected growth rate is 7%. Please use $135 per share as the stock price. Calculate the cost of equity rs using the DCF approach.