When the CEO of Westmont Electronic Company wants to determine the cost of common equity, she uses both the capital asset pricing model and the dividend valuation model. Assume:
Rf= 8%
Km= 13%
?= 1.7%
D1= $0.90
P0= $20
g= 9%
1. Compute Ki (required rate of return on common equity based on the capital asset pricing model). Answer as a percent rounded to 2 decimal places.
2. Compute Ke (required rate of return on common equity based on the dividend valuation model). Answer as a percent rounded to 2 decimal places.