Problem 9-5 Cost of Equity: Dividend Growth

Problem 9-5
Cost of Equity: Dividend Growth

Summerdahl Resort's common stock is currently trading at $28.00 a share. The stock is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00), and the dividend is expected to grow at a constant rate of 4% a year. What is the cost of common equity? Round your answer to two decimal places.