(Estimated time allowance: 7 minutes) The following information is obtained from the financial statements of a corporation. Click heree for formatted shell excel file.
Market: Expected return is 12%. Risk-free rate is 1.38.
The tax rate is 40%.
Common stock: Each share of stock is currently trading for $52. Last year, the company paid a dividend of $5.31 per share.
The dividend is expected to grow by 6 percent per year indefinitely. The stock has a beta is 1.20. The corporation has 600,000 shares outstanding.
What is the average cost of common equity (Re) for this company?
For your answer, round to the nearest .1%. Do not use the % sign in your answer. For example, if the answer is 9.23%, enter your answer as 9.2; Do not enter it as .0923, 0.0923, or 9.23%.