Miltmar Corporation will pay a year-end dividend of $4, and dividends thereafter are expected to grow at the constant rate of 5% per year. The risk-free rate is 6%, and the expected return on the market portfolio is 12%. The stock has a beta of .92.
a. Calculate the market capitalization rate (cost of equity). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What is the intrinsic value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)