You are an Investment Manager at Pegasus Securities and you are preparing for the next meeting of the investment committee. The committee requested you to assess the capital structure of Industrial Production Ltd a manufacturer of industrial products. The following information is available about the company in assisting you in making your assessment

A. Cost of Equity - Suppose stock in Industrial Production Ltd has a beta of .80. The return on the market 12% percent, and the risk-free rate is 6 percent the firms last dividend was $1.20 per share, and the dividend is expected to grow at 8 percent indefinitely. The stock currently sells for $45 per share.

Determine the firms cost of equity capital using the:

i. SML approach

ii. Dividend growth model