Floyd Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5 percent per year. The expected return on the market is 12 percent, and Treasury bills are yielding 5.0 percent. The most recent stock price for Floyd is $67.
a. Calculate the cost of equity using the DDM method. (Round your answer to 2 decimal places.)
b. Calculate the cost of equity using the SML method.