ADK Industries Common Shares Sell for $60 Per Share

Multiple Choice

ADK Industries common shares sell for $60 per share. ADK expects to set their next annual dividend at $3.75 per share. If ADK expects future dividends to grow at 9 percent per year, indefinitely, the current risk-free rate is 4 percent, the expected rate on the market is 11 percent, and the stock has a beta of 1.5, what should be the best estimate of the firm's cost of equity, by taking an average of the 2 estimates?

A) 15.25 percent
B) 14.50 percent
C) 14.88 percent
D) 15.03 percent