Stock in Dragula Industries has a beta of 1.6. The market risk premium is 6 percent, and T-bills are currently yielding 5.50 percent. The company's most recent dividend was $1.90 per share, and dividends are expected to grow at a 7.0 percent annual rate indefinitely.
Question:
If the stock sells for $38 per share, what is your best estimate of the company's cost of equity?
Note: Please provide full description.