Problem:
Berta Industries stock has a beta of 1.30. The company just paid a dividend of $0.30, and the dividends are expected to grow at 4 percent. The expected return on the market is 13 percent, and Treasury bills are yielding 5.1 percent. The most recent stock price for Berta is $68.
Required:
Question 1: Calculate the cost of equity using the DCF method.
Question 2: Calculate the cost of equity using the SML method.
Note: Show supporting computations in good form.