Laverne Industries stock has a beta of 1.15. The company just paid a dividend of $.95, and the dividends are expected to grow at 4 percent. The expected return of the market is 11.5 percent, and Treasury bills are yielding 3.8 percent. The most recent stock price is $81.
Required:
Calculate the cost of equity using the dividend growth model method.
Calculate the cost of equity using the SML method.