The future earnings, dividends, and common stock price of Circle Group are expected to grow at a rate of 4% per year. The companys common stock is currently selling for $50 per share and its last dividend was $3.

a. What is the companys cost of common equity?

b. If the firms beta is 1.50, the risk-free rate is 5%, and the market rate of return is 14%, what will be the cost of common equity using the CAPM approach?

c. If you have equal confidence in the inputs used for the two approaches, what is your estimate of the companys cost of common equity?