Problem:
Stock in Dragula Industries has a beta of 1.2. The market risk premium is 5 percent, and T-bills are currently yielding 4.90 percent. The company's most recent dividend was $1.90 per share, and dividends are expected to grow at a 5.0 percent annual rate indefinitely.
Required:
Question: If the stock sells for $50 per share, what is your best estimate of the company's cost of equity?
Note: Please show guided help with steps and answer.