R.K. Boats Inc. is in the process of making some major investments for growth and is interested in calculating their cost of equity so as to be able to correctly estimate their adjusted WACC. The firm’s common stock is currently trading for $43.25 and their annual dividend, which was paid last year, was $2.25, and should continue to grow at 6% per year. Moreover, the company’s beta is 1.35, the risk-free rate is at 3%, and the market risk premium is 9%. Calculate a realistic estimate of RKBIs cost of equity. (Ignore floatation costs)
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