Sabrina's just paid an annual dividend of $1.79 per share. This dividend is expected to increase by 2.5percent annually. Currently, the firm has a beta of .87 and a stock price of $31 a share.

Finance Basics

Sabrina’s just paid an annual dividend of $1.79 per share. This dividend is expected to increase by 2.5percent annually. Currently, the firm has a beta of .87 and a stock price of $31 a share. The risk-free rate is 4.5percent and the market rate of return is 11.8 percent. What is the cost of equity capital for Sabrina’s?

A. 8.27 percent
B. 8.43 percent
C. 9.63 percent
D. 10.86 percent
E. 11.07 percent

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